Washington Business Law Attorney
Washington has built one of the most dynamic business economies in the country — technology in Seattle, aerospace across the Puget Sound, agriculture east of the Cascades, and biotech, healthcare, and clean energy throughout the state. The legal framework that supports that economy is equally distinctive: no state personal or corporate income tax, but a Business & Occupation (B&O) tax on gross receipts; a new state capital gains tax; some of the most protective employment laws in the country; and strict statutory limits on non-compete agreements. Our firm helps Washington entrepreneurs, established businesses, technology workers, and out-of-state companies expanding into Washington with the full lifecycle of business law work.
Washington office: (206) 279-4780
Entity Formation
The first step in any new Washington business is choosing the right entity structure. We routinely form:
Limited Liability Companies (LLCs)
The Washington LLC is the workhorse entity for most new Washington businesses. Formation requires filing a Certificate of Formation with the Washington Secretary of State under the Washington Limited Liability Company Act (RCW 25.15). The current filing fee is modest, and online formation is typically processed quickly. Washington LLCs are flexible: they can be member-managed or manager-managed, taxed as partnerships (default), S-Corporations, or C-Corporations, and can accommodate complex capital structures through a well-drafted operating agreement.
Business Corporations
Washington corporations are formed under the Washington Business Corporation Act (RCW Title 23B). C-Corporations remain the right choice for businesses planning to raise venture capital, issue multiple classes of stock, or pursue an eventual IPO — common goals in the Seattle technology ecosystem. S-Corporation election (made with IRS Form 2553) is often valuable for active service businesses with modest numbers of owners.
Limited Partnerships and Limited Liability Partnerships
The Washington Limited Partnership Act and Limited Liability Partnership rules govern less common but still useful structures, particularly for professional service firms and investment funds.
Washington Business & Occupation (B&O) Tax
Washington does not impose a state corporate or personal income tax, but it does impose a B&O tax on the gross receipts of most businesses operating in Washington. Rates vary by activity classification: roughly 0.484% for manufacturing and wholesaling, 0.471% for retailing, 1.5% for service and other activities, and higher rates for some specialized categories. Because B&O is computed on gross receipts (not net income), even unprofitable businesses owe tax. Entity classification, activity classification, and apportionment for multi-state businesses require careful planning. We work with clients and their CPAs to structure operations for B&O efficiency.
Washington Capital Gains Tax
Washington enacted a 7% state capital gains tax effective January 1, 2022, applicable to long-term capital gains exceeding an annual statutory threshold (currently $270,000 in 2024 dollars, indexed annually). The tax was upheld by the Washington Supreme Court in Quinn v. State (2023). Important exclusions apply to real estate gains, retirement account distributions, gains from sale of a qualified family-owned small business, and certain other categories. For Washington business owners contemplating a sale of all or a portion of their business, the capital gains tax is now a meaningful part of after-tax exit planning. We coordinate with clients and tax advisors on transaction structuring (asset vs. stock sale, installment treatment, qualified small business exclusion analysis) to manage the exposure.
Operating Agreements and Shareholder Agreements
The most important document in most Washington businesses is the operating agreement (LLCs) or shareholder agreement (corporations). Washington’s default rules under RCW 25.15 and RCW 23B cover only a portion of what owners actually need to address. A well-drafted agreement covers:
- Management structure and decision-making authority.
- Allocations of profit and loss, including tax distributions.
- Capital contributions and capital call obligations.
- Transfer restrictions, rights of first refusal, drag-along, and tag-along provisions.
- Buy-sell triggers (death, disability, divorce, deadlock, retirement, termination).
- Valuation methodology for buyout transactions.
- Non-compete, non-solicit, and confidentiality obligations of departing owners (subject to RCW 49.62 limitations).
- Indemnification and exculpation of managers and directors.
- Dispute resolution — arbitration, mediation, and forum selection.
Washington Non-Compete Statute (RCW 49.62)
Washington passed one of the most employee-protective non-compete statutes in the country, effective January 1, 2020 (RCW 49.62). The key restrictions:
- Income threshold. Non-competes are enforceable against employees only if the employee earns more than a statutory annual amount (adjusted yearly — approximately $123,394 for 2025; verify current threshold before drafting). Independent contractors have a higher threshold (roughly $308,485 for 2025).
- Written notice in advance. The covenant must be disclosed in writing no later than acceptance of the offer of employment. Mid-employment covenants require independent consideration.
- Maximum duration. Post-employment non-competes are presumed unreasonable beyond 18 months.
- Garden leave / continued compensation may be required to enforce a non-compete after layoff.
- Choice of law restrictions. Out-of-state choice-of-law provisions in non-competes against Washington-based employees are unenforceable.
- Mandatory attorney fee-shifting if an employer attempts to enforce a non-compete that does not meet statutory requirements.
We draft non-competes calibrated to RCW 49.62 and reform existing agreements that would not survive judicial scrutiny.
Washington Employment Compliance
Washington imposes some of the most employee-protective rules in the country:
- Paid Family & Medical Leave (RCW Title 50A) provides paid leave for serious health conditions, family caregiving, bonding with a new child, and qualifying military-related events, funded by employer and employee payroll contributions.
- Wage transparency (RCW 49.58.110) requires employers with 15 or more employees to include wage scale or salary range, and a general description of benefits, in every job posting. Penalties for noncompliance include statutory damages.
- Paid sick leave requirements under RCW 49.46.
- Independent contractor classification uses different tests depending on context (workers’ compensation, unemployment insurance, minimum wage), and misclassification exposes the business to significant liability.
- Mini-WARN Act requirements for layoffs and plant closings.
We integrate these requirements into employment offer letters, handbooks, independent contractor agreements, and severance documentation.
Contracts
We draft and review the contracts that move every business: master services agreements, statements of work, vendor agreements, software licenses (a particular focus given the Seattle technology economy), distribution agreements, employment documentation, NDAs, asset purchase agreements, and bills of sale. Washington gives sophisticated parties broad freedom of contract, and the state’s Consumer Protection Act (RCW 19.86) provides specific consumer remedies that need to be considered in any business-to-consumer documentation.
Acquisitions and Sales
Buying or selling a business is the largest legal transaction most owners undertake. We represent buyers and sellers in:
- Letter of intent and term sheet negotiation.
- Asset purchase and stock or membership interest purchase agreements.
- Due diligence coordination.
- Reps and warranties, indemnification, escrow, and rep-and-warranty insurance.
- Capital gains tax structuring (asset vs. stock sale, installment treatment, qualified small business exclusion analysis).
- Earn-out and seller-financing structures.
- Post-closing integration and transition services agreements.
Foreign Entity Registration in Washington
If your business is formed in another state but doing business in Washington, you generally must register as a foreign entity with the Washington Secretary of State. Operating in Washington without proper registration prevents your company from maintaining a lawsuit in Washington courts and exposes it to penalties. Because we are licensed in California, Idaho, Texas, Washington, and North Carolina, we can handle both the home-state formation and the Washington foreign registration in a single engagement.
Technology Compensation Issues
Washington’s technology economy creates legal issues that other states see less often. We help technology workers and employers with:
- Restricted Stock Units (RSUs), stock options, and ESPPs — vesting, tax treatment, and integration with estate planning and divorce settlements.
- Deferred compensation agreements under Internal Revenue Code § 409A.
- Equity compensation in M&A transactions — treatment of unvested equity, change-in-control provisions, and retention packages.
- Founder agreements for early-stage companies — vesting schedules, IP assignments, and founder departures.
Business Disputes and Litigation
We represent businesses in commercial disputes — breach of contract, partnership and shareholder disputes, breach of fiduciary duty, non-compete enforcement and defense, business torts, fraud claims, Consumer Protection Act claims, and tortious interference — in Washington superior court, federal court, and arbitration. Most disputes are best resolved before trial; we negotiate aggressively but are prepared to try cases when settlement does not make sense.
Schedule a Washington Business Law Consultation
Washington: (206) 279-4780
Our other offices:
Idaho (208) 696-2772 · Southern California (714) 464-5188 · Northern California (707) 207-8005 · Texas (469) 535-6260 · North Carolina (919) 363-9945
See also: Washington (state hub) · Business Law (pillar)
Disclaimer: The information on this page is general legal information about Washington business law and is not legal advice. RCW 49.62 thresholds, capital gains tax thresholds, and B&O tax rates change. Always consult a Washington-licensed attorney about your specific situation. No attorney-client relationship is formed by visiting this page.
Schedule a Free Consultation in Washington
Discuss your matter with our Washington team. Initial consultations are complimentary.
Washington: (206) 279-4780
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Related Pages
- Washington multi-state practice hub — overview of all our Washington services.
- Business Law across five states — see how we coordinate business law matters across Idaho, California, Texas, Washington, and North Carolina.
- Washington Estate Planning
- Washington Real Estate