Choosing and forming the right legal entity is one of the first decisions a Washington business owner makes, and one of the hardest to undo cheaply later. Holmes Law works with founders, family businesses, and investors as a Washington entity formation attorney, helping them decide between a limited liability company, a corporation, or a partnership, prepare the formation filings with the Secretary of State, and set up the ownership documents that should be signed on day one rather than after the first disagreement.
Washington is different from most states in ways that affect entity choice. It has its own LLC statute, rewritten effective January 1, 2016; it taxes businesses primarily through the gross-receipts Business and Occupation (B&O) tax rather than a corporate income tax; it has historically had no personal income tax on wages or business profits, although that is changing; and it is a community property state, which matters whenever a married owner holds an interest. Michael Holmes is admitted in Washington and works with clients statewide by video and phone. This page is general information to help you prepare for a consultation, not legal or tax advice about your situation.
The Washington Statutes That Govern Each Entity Type
Each type of Washington business entity has its own statute, and the statute supplies the default rules that apply whenever the owners have not written their own. A Washington entity formation attorney starts by matching the business to the right statute:
- Limited liability companies: the Washington Limited Liability Company Act, chapter 25.15 RCW.
- Profit corporations: the Washington Business Corporation Act, Title 23B RCW.
- General partnerships and limited liability partnerships: the Revised Uniform Partnership Act as adopted in chapter 25.05 RCW.
- Limited partnerships: chapter 25.10 RCW.
- Professional service corporations: chapter 18.100 RCW, with professional LLCs addressed in RCW 25.15.046.
- Social purpose corporations: chapter 23B.25 RCW, Washington’s framework for for-profit companies that adopt a stated social or environmental purpose.
Cross-cutting rules for most of these entities, including registered agents, annual reports, and registration of out-of-state entities, are collected in the Uniform Business Organizations Code, chapter 23.95 RCW. That chapter is a useful reminder that Washington treats filing and compliance mechanics uniformly across entity types even though governance rules differ.
LLC, Corporation, or Partnership: How to Compare Them
There is no single correct answer. The right entity depends on who the owners are, how the business will be financed, how profits will be taken out, and what the owners expect to happen in five or ten years.
Limited liability companies
The LLC is the most common choice for Washington small businesses, real estate holdings, and closely held family ventures. The Washington LLC Act gives the members wide freedom to write their own rules in the LLC agreement (the statute’s term for what most people call an operating agreement). Members are generally not personally liable for company debts, and RCW 25.15.061 applies the same liability standard used for shareholders of a Washington corporation, with the notable statement that failing to hold meetings is not a factor. For tax purposes, a multi-member LLC is taxed as a partnership by default and a single-member LLC is disregarded, but either can elect to be taxed as a corporation or an S corporation.
Corporations
A corporation formed under Title 23B has a more rigid structure: shareholders elect directors, directors appoint officers, and the statute prescribes procedures for meetings, voting, and distributions. That structure is an advantage when the company expects to raise money from outside investors, issue stock options, or eventually sell to a buyer who expects a conventional capitalization table. Venture investors typically expect a corporation, often a Delaware corporation registered to do business in Washington. For closely held companies, RCW 23B.07.320 allows the shareholders, by unanimous written agreement, to vary many of the default rules, which can give a small corporation some of the flexibility of an LLC.
Partnerships
A general partnership forms automatically whenever two or more people carry on a business for profit as co-owners, whether or not they sign anything or file anything. The partners are personally liable for partnership obligations, which is the main reason most Washington businesses should not operate as an accidental partnership. A partnership can file a statement of qualification to become a limited liability partnership, which limits partner liability. Limited partnerships remain useful in some real estate and family investment structures, where a general partner manages and limited partners invest passively.
Forming the Entity With the Washington Secretary of State
Washington entities are formed by filing with the Corporations and Charities Division of the Office of the Secretary of State, typically online through the state’s filing system. An LLC files a certificate of formation; a corporation files articles of incorporation; a limited partnership files a certificate of limited partnership. Filing fees are set by the Secretary of State and change from time to time, so Holmes Law confirms the current fee schedule at the time of filing rather than quoting a figure that may be out of date.
The formation document itself is short. The more important work is deciding what goes in it and what goes in the private governing documents. For example:
- Name. The name must be distinguishable on the Secretary of State’s records and must include the designator the statute requires, such as “LLC” or “Inc.” A name reservation can hold a name while planning is underway.
- Management structure. An LLC is member-managed unless the certificate of formation or LLC agreement says it is manager-managed. That choice changes who has authority to bind the company and what fiduciary duties apply.
- Registered agent. Every entity must maintain a registered agent with a Washington address.
- Initial governing persons. Filings typically identify governors, such as members, managers, or directors, and the Secretary of State expects that information to stay current.
After formation, the business will usually need a Unified Business Identifier (UBI) number and a business license through the Department of Revenue’s Business Licensing Service, plus any city license endorsements required where it operates. Businesses with employees also register for unemployment insurance with the Employment Security Department and for workers’ compensation with the Department of Labor and Industries.
Registered Agents, Annual Reports, and Staying in Good Standing
Chapter 23.95 RCW requires every Washington entity and every registered foreign entity to maintain a registered agent. The registered agent receives service of process, tax notices, and state correspondence. An owner may serve as the company’s own registered agent if the owner has a Washington street address and is reliably available during business hours; many owners instead use a commercial registered agent, which the statute also recognizes.
Every entity must also file an annual report with the Secretary of State, generally by the end of the month in which the entity was formed, and pay the annual fee. The report confirms the principal office, registered agent, and governors. Missing it is the most common reason Washington businesses fall out of good standing. After notice, the Secretary of State may administratively dissolve a domestic entity or revoke a foreign registration. Reinstatement is usually possible, but a lapse can cause trouble in a loan closing, a lawsuit, or a sale, and it can cost the company rights to its name.
Owners who form multiple entities, such as an operating company and one or more real estate LLCs, should calendar every annual report date. Each entity reports on its own anniversary month.
Washington Taxes That Apply to Business Entities
Tax treatment drives many entity decisions, and Washington’s tax system is unusual.
The B&O tax
Washington does not impose a corporate income tax. Instead, most businesses pay the Business and Occupation tax under chapter 82.04 RCW, which is measured by gross receipts rather than profit. The rate depends on the classification of the activity, such as retailing, wholesaling, manufacturing, or services, and the Legislature has changed several rates in recent sessions. Because B&O applies to gross receipts regardless of entity type, choosing an LLC instead of a corporation does not reduce it. Some cities, including Seattle, impose their own local B&O taxes.
Sales and use tax
Businesses that sell tangible goods, and some that sell digital products or services the Legislature has made taxable, must collect retail sales tax and may owe use tax on items they purchase for their own use without paying sales tax.
Income taxes on owners
Historically, Washington has had no personal income tax on wages or business profits, which meant pass-through income from an LLC or S corporation was not taxed at the state level. Two developments change the planning picture. First, Washington imposes a tax on individuals’ long-term capital gains under chapter 82.87 RCW, which can apply when an owner sells an interest in a business, subject to deductions and exemptions. Second, in 2026 the Legislature enacted a tax on high personal incomes (ESSB 6346), scheduled to begin with tax year 2028, which reaches business income passing through to owners above a high threshold and includes an optional pass-through entity-level election. That law is expected to face constitutional challenges. Owners who anticipate large distributions or a business sale should revisit entity and tax structure with their CPA as the rules settle.
The S Corporation Election in Washington
An S election is a federal tax election, filed with the IRS on Form 2553, and it is available to a corporation or to an LLC that elects to be taxed as a corporation. In most states, the election is weighed against state income tax consequences. In Washington, where there has been no state personal or corporate income tax, the analysis has usually been federal only: whether salary-and-distribution planning to reduce self-employment tax justifies the added payroll administration, the reasonable compensation requirement, and the eligibility limits (one class of stock and restrictions on who may be a shareholder).
Washington-specific points still matter. The B&O tax is unaffected by the S election. Community property can affect eligibility and consent, because both spouses may be treated as owning shares acquired during marriage. And the new high-income tax, if it takes effect as written, may change the math for owners whose pass-through income is large. Holmes Law coordinates the legal side of an S election, such as governing document provisions that preserve eligibility and restrict transfers to ineligible shareholders, with the owner’s tax preparer.
Series LLCs and Professional Entities
Series LLCs
Some states, including Delaware, allow a single LLC to establish separate series, each with its own assets and liabilities. Washington’s LLC Act does not currently authorize the formation of series within a Washington LLC. Owners who want to separate several rental properties or business lines in Washington typically form separate LLCs, sometimes under a common holding company. Using an out-of-state series LLC for Washington property raises questions about how Washington courts and agencies will treat the internal liability shields, and it adds registration and reporting in two states. Holmes Law generally recommends separate Washington entities unless there is a specific reason to do otherwise.
Professional service entities
Licensed professionals, such as physicians, dentists, accountants, architects, and lawyers, may practice through a professional service corporation under chapter 18.100 RCW or a professional LLC under RCW 25.15.046. Ownership is generally limited to people licensed to render the professional service, and the entity name must meet the statute’s designator requirements. Forming a professional entity does not shield a professional from liability for his or her own professional negligence; it protects the owners from the business’s contract debts and, generally, from the professional errors of colleagues. Licensing boards may have additional rules, so the formation plan should be checked against the relevant board’s requirements.
Foreign Qualification: Out-of-State Entities Doing Business in Washington
A company formed in another state, often Delaware, Nevada, Idaho, or Oregon, that does business in Washington must register as a foreign entity with the Secretary of State under chapter 23.95 RCW. The registration requires a certificate of existence from the home state and a Washington registered agent, and it triggers Washington annual report obligations. A foreign entity that transacts business without registering may not maintain an action in a Washington court until it registers, and it may be liable for fees and penalties for the period it was unregistered, although the failure generally does not invalidate its contracts.
The reverse also happens. A Washington LLC that owns property or hires employees in Idaho, Oregon, California, or another state usually must register there. Because Michael Holmes is admitted in Washington, California, Idaho, Massachusetts, North Carolina, and Texas, Holmes Law can coordinate filings for businesses that operate in more than one of those states.
Community Property and the Married Business Owner
Washington is a community property state. An ownership interest acquired during marriage, or during a registered domestic partnership, is presumptively community property even if only one spouse’s name appears on the certificate of formation or share ledger. Under RCW 26.16.030, when both spouses participate in managing a business, neither may sell, convey, or encumber the business’s assets or goodwill without the other’s consent. That rule has practical effects: lenders and buyers may ask for spousal consents, and operating and shareholder agreements for Washington businesses commonly include spousal consent forms so that transfer restrictions and buy-sell terms bind the owner’s spouse.
Entity formation is also an opportunity to align the business with the owner’s estate plan. Holding the interest in a revocable living trust, for example, can avoid probate for the business interest and let a successor trustee act immediately. See the WA revocable trust page and the Washington estate planning overview.
What to Sign at Formation
Filing the certificate or articles creates the entity, but it does not answer the questions that cause most disputes. At or near formation, Holmes Law typically prepares:
- An LLC agreement or bylaws plus, for a closely held corporation, a shareholder agreement. See WA operating and shareholder agreements.
- A buy-sell agreement, or buy-sell provisions within the governing documents, covering death, disability, divorce, and departure. See WA buy-sell agreements.
- Contribution and assignment documents that move cash, equipment, intellectual property, or real estate into the company with a clear record.
- Initial resolutions or consents authorizing bank accounts, officers, and the tax election.
- Spousal consents where an owner is married or in a registered domestic partnership.
Founders who will be signing customer, vendor, or employment contracts early should also review WA business contracts, particularly Washington’s restrictions on noncompetition covenants.
Frequently Asked Questions
Should my Washington business be an LLC or a corporation?
For most owner-operated businesses and real estate holdings, an LLC offers flexibility and pass-through tax treatment with less formality. A corporation is usually the better fit if you plan to raise venture capital, issue stock options broadly, or take the company public. The answer depends on ownership, financing, and exit plans, so it is worth discussing before filing.
Can I form a series LLC in Washington?
Washington’s LLC Act does not currently provide for series LLCs. Owners who want separate liability compartments usually form separate Washington LLCs, sometimes owned by a holding company.
Does an LLC reduce my Washington B&O tax?
No. The B&O tax is measured by gross receipts and applies to LLCs, corporations, partnerships, and sole proprietors alike, based on the type of business activity rather than the entity form.
Do I need to register my Delaware company in Washington?
If the company is doing business in Washington, such as maintaining an office, employing people here, or regularly transacting business here, it generally must register as a foreign entity with the Secretary of State, appoint a Washington registered agent, and file Washington annual reports.
What happens if I miss the annual report?
The Secretary of State may administratively dissolve the entity, or revoke a foreign entity’s registration, after notice. Reinstatement is usually available but involves fees and paperwork, and a lapse can complicate financing, litigation, and sales.
Does my spouse have an interest in the business I form?
If you acquire the interest during marriage or a registered domestic partnership using community funds or effort, it is presumptively community property in Washington. A marital agreement or careful documentation can change or clarify that characterization.
Speak With a Washington Entity Formation Attorney
The most cost-effective time to make entity decisions is before the first filing, when changes are inexpensive. Holmes Law helps Washington owners choose an entity, complete formation and registration, and put governing documents in place that match how they actually intend to run the business. Visit the Washington business law page for an overview of the practice, or contact Holmes Law to schedule a consultation by video or phone.