How Much Does an LLC Cost in Washington?

How Much Does an LLC Cost in Washington?

Forming a limited liability company (LLC) can seem like a daunting and expensive process filled with legal fees, filing costs, licensing expenses, and more. However, starting an LLC in Washington doesn’t have to break the bank if you understand the full range of costs involved.

With proper planning and budgeting, you can launch your Washington LLC smoothly while keeping costs under control. In this comprehensive guide, we’ll outline the key steps and associated expenses to form and operate an LLC in Washington.

LLC Formation Costs in Washington

The basic process to form an LLC in Washington involves several steps, each with their own costs depending on your business’s specific needs.

Choosing a Business Name

The first official step is selecting a name for your LLC. You can check for name availability on the Washington Secretary of State website for free. If you find a business name you like, you may choose to reserve it by filing an Application for Reservation of Name. The fee to reserve a business name is $20 in Washington.

You also have the option to file for a “doing business as” (DBA) name, which allows you to operate your business under a different name than your official LLC name. To obtain a DBA, you must submit a Certificate of Assumed Name and pay a $20 filing fee.

Pro tip: Reserve your preferred LLC name ASAP if you have one in mind, even if you’re still planning out your business. This ensures no one else can take the name before you’re ready to formally file.

Filing Articles of Organization

To legally establish your LLC, you must file Articles of Organization with the Secretary of State in Washington. This document essentially registers your business as a legal entity in the state.

The filing fee for articles of organization is $180 in Washington. You’ll also need to submit an initial report and pay a $10 filing fee when you submit your articles.

Designating a Registered Agent

A registered agent is a person or service designated to receive official documents and notices on behalf of your LLC. Washington law requires all LLCs to have a registered agent with an in-state address.

You can save money by serving as your own registered agent. However, this requires you to be available at your specified address during all normal business hours to receive legal paperwork.

Many businesses prefer to use a commercial registered agent service for convenience and privacy. This costs between $199 to $400 per year, but is generally worth the investment.

Creating an operating agreement

An operating agreement establishes the governing rules and procedures for your LLC. While not legally required, having an operating agreement is highly recommended for all Washington LLCs.

You can create your own operating agreement for free, but getting professional assistance can provide peace of mind that you’re establishing compliant, legally valid processes. Online services charge $99 to $200 for custom operating agreements. Hiring a business lawyer typically costs $500 to $1,000 or more.

Ongoing Washington LLC Costs

In addition to the initial setup process, you’ll need to factor in ongoing costs to maintain compliance and keep your business running smoothly.

Licenses & Permits

Most businesses require licenses and permits from local city/county governments and the state. Common examples include:

Be sure to thoroughly research which licenses/permits apply to your industry and local jurisdiction. Fees vary widely.

Annual Report

LLCs in Washington must file an annual report with the Secretary of State to maintain active status. This involves providing updated company information and contact details. The fee to file the report is $60 per year.

Annual License Fee

In addition to the annual report, Washington charges an annual license fee based on total gross income:

This annual LLC fee is separate from the annual report filing. It is due by May 31st each year.

Taxes

As a business entity, your Washington LLC will be subject to certain state and federal taxes. For example:

Be sure to consult a tax professional to ensure full compliance with all applicable taxes.

Accounting & Bookkeeping

Proper financial accounting and bookkeeping is crucial for tracking income and expenses, issuing financial statements, managing profit distributions to members, and filing taxes.

Office Space

Most LLCs require some sort of office or retail space to conduct business operations. Costs vary widely based on size, location, and amenities, but expect to budget $12 to $30 per square foot in monthly rent.

Additionally, you’ll have utilities costs of $300-$500 per month typically and potentially shared common space fees. Consider your space needs carefully as real estate is often one of the largest ongoing costs.

Key Washington LLC Costs - Summary

To recap, the most common ongoing Washington LLC costs include:

Of course, your specific costs will depend on your entity structure, location, and business activities. But these represent typical fees for most LLCs.

Tax Deductions for LLC Expenses

The major benefit – many LLC formation and operational costs are tax deductible! The IRS allows you to deduct legitimate business expenses, including:

Track your expenses diligently and consult an accountant to maximize your eligible tax deductions.

Conclusion

Launching an LLC involves many upfront and ongoing costs – but armed with the knowledge of what to expect, you can build those expenses into your business plan and budget accordingly.

The benefits of limited liability protection and operational flexibility make starting an LLC rewarding for many business owners. With a little diligence during the formation process and proper financial management, your Washington LLC can flourish for many years to come.

FAQ

The state filing fee is $180, the initial report fee is $10, and total startup costs range from $300 to $600 on average, including a registered agent, licenses, etc. Ongoing costs for an LLC in WA include the $60 annual report, a variable annual licensing fee, taxes, and more.

You must pay $60 per year to file your annual report. You’ll also owe a licensing fee each year based on revenue, ranging from $0 to $1,600. Expect to pay registered agent and licensing renewal fees annually. Taxes will vary by business.

Yes, most LLC setup fees, state filing costs, registered agent services, legal fees, accounting fees, licenses, taxes, and more qualify as deductible business expenses, which can lower your federal taxable income.

Yes, Washington law mandates that every LLC must appoint a registered agent, who can receive legal notices and service of process on the company’s behalf. You can either act as your own agent or hire a professional service.

No, operating agreements are not legally required in Washington. However, they are strongly recommended to establish operating procedures, outline member roles, voting, and profit distribution.