Your LLC's Name
Your new LLC's business name must be distinguishable from all other Washington State LLCs, corporations, and other business entities authorized to conduct business by the Washington Secretary of State. This applies to entities formed in Washington, as well as those originally formed elsewhere but authorized to operate in the Evergreen State.
The LLC name must contain, as the last words of the name, one of the following terms: "Limited Liability Company," "Limited Liability Co.," "LLC," or "L.L.C." It may not include the words "corporation," "incorporated," "limited partnership," "LP," "L.P.," "Ltd.," or any abbreviation or term that states or implies that it has been formed for some purpose not included in its certificate of formation, or that it is a part of the government.
Additionally, your LLC's name is not allowed to contain the terms "bank," "banking," "banker," "trust," or "cooperative," any combination of the words "industrial" and "loan," or any two of the following words: "building," "savings," "loan," "home," "association," and "society." The LLC's name is allowed, however, to contain the name of a member or manager.
LLC names can be reserved with the state for up to 180 days at a time for $30.
Certificate of Formation
Getting your Washington State LLC up and running means that you must file a certificate of formation with the Washington Secretary of State, along with a $175 filing fee. You can get expedited processing for an additional $20 fee. The organizers of the LLC must also file a Master Business Application and get a Unified Business Identifier (UBI) number. The fee for these is $15.
The certificate of formation for the new LLC must be signed by at least one person. The document must include the LLC's name, the address of its registered office and the name of its registered agent there, the address of the LLC's principal place of business, a brief description of what the LLC's business is, the LLC's duration (either perpetual or for a specified period of time), a statement as to whether the LLC will be member-managed or manager-managed, and the name and address of everyone who signs the certificate of formation.
The certificate can also contain other items that the members desire to include (presuming they don't conflict with state law), even if they are also included in the operating agreement.
Your LLC has achieved officially "organized" status once an original and one copy of the certificate of formation are received by the Washington Secretary of State's office with the filing fee. The certificate of formation is effective as of the date and time filed, unless some other effective date is specified.
Registered Agent and Office
Washington LLCs are required to have a registered in-state agent who is designated to receive official administrative and legal correspondence from the state. The registered agent can be an individual Washington resident whose business office is the same as the registered office, or it can be a corporation or LLC that is authorized to do business in the state. The registered office may be (but doesn't have to be) the LLC's place of business; however, it cannot be just a post office box-there has to be an actual street address listed.
Operating Agreement
Almost as critical for the organization as the certificate of formation is the operating agreement. This can be amended in a way that's specified by the agreement itself, or in a manner permitted by state law. The state doesn't officially require your LC to have this-but it's a critical internal document that officially documents how your LLC will operate on both a day-to-day and a strategic basis. The operating agreement should name the members, specify how much each member has invested, explain how profits will be divided, and state how much proportional "weight" each member has when issues are voted upon.
The operating agreement may also set forth meeting requirements such as the amount of required notice, what constitutes a quorum, voting rules, and so on, but it doesn't have to. Normally, however, the operating agreement does list requirements for the LLC that are already listed in state law and regulations. It can also include such items as restrictions or constraints on the power of the members to adopt, amend, or repeal the operating agreement. If there is more than one member, the operating agreement must initially be approved unanimously in writing by the members.
Membership in the LLC
An LLC is required to have one or more members; each member must be either a natural person or a business entity recognized by the state. Members may become a member of or acquire an interest in the LLC when it is first started (using the method set forth in the operating agreement), or when the new member's admission is recorded in the LLC's records.
To join the LLC, the prospective member usually needs to make a contribution of some kind-for instance, pay cash or transfer property to the LLC-or take a binding obligation to do so. However, a member may be admitted to the LLC without acquiring a membership interest if the rules in the certificate of formation and operating agreement permit it, or if the members vote to do so and the admission is documented in the LLC's records.
An LLC member can only resign in accordance with applicable provisions in the certificate of formation or the operating agreement. One or both of these documents will also usually state the minimum amount of time a member can maintain membership before being allowed to resign. LLCs can pursue remedies for damages suffered by the organization that result from a member's resignation.
Ongoing Requirements
Each Washington State LLC must file a report annually with the Secretary of State that updates its certificate of formation. Additionally, each LLC must keep these kinds of records available at its office for review or inspection:
- Current and past members and managers and with the mailing address for each
- Certificate of formation and any amendments
- Operating agreement with any amendments and/or prior versions
- Federal, state, and local LLC income tax returns for the last three years
- Financial statements for the LLC for the last three years
- Amount of cash and the value and description of any other property or services contributed or agreed to be contributed by each member
- Times or events that will trigger any additional contributions agreed to be made by each member
- Any member's right to receive distributions that include a return of any part of the member's contribution
Also, it's a very good idea to keep on file and available the minutes of the meeting of the board and any committees of the owners or members.
Dissolution
An LLC is dissolved when any one of the following events occurs:
- Event(s) that are specified in the certificate of formation or operating agreement
- The required number or percentage of members specified in the operating agreement agree to dissolve the LLC
- Event that makes it illegal for the LLC to continue
- The last member leaves the LLC, unless the assignees vote within 90 days to admit one or more members
- A Court order ordering dissolution
Taxes
An LLC by its nature offers some tax advantages over a corporation's structure, including the availability of more deductions. The biggest advantage is that an LLC is not required to be a separate tax entity like a corporation. Instead, it can be a "pass-through entity" for tax purposes, so that the LLC owners report business losses or profits on their personal tax returns, in the same way that a partnership does.
Washington State does not have an income tax for individuals or corporations as such. The state does, however, apply a business and occupation tax (B&O) based on the LLC's gross revenue.
Choosing a Corporation Name
The name you decide on for your new corporation cannot be the same as or deceptively similar to the name of any other Washington business entity registered or reserved with the state. The name may not include language that states or implies that the corporation is organized for some purpose other than one permitted by state law or than stated in its articles of incorporation. The name must also include the words "incorporated," "corporation," "limited," or "company," or an abbreviation of one of those terms.
If your corporate name is not considered sufficiently distinguishable from one already on file with the state, it's not enough to just change some punctuation, a definite or indefinite article (such as "a," "an," or "the"), or the status designator ("corporation," "company," "incorporated," "limited," etc.). You have to make a significant change.
Corporate names can be reserved with the state for a $30 fee for up to 180 days at a time.
Articles of Incorporation
The Washington Business Corporation Act (Title 23B of the Revised Code of Washington) requires that articles of incorporation must be filed with the Washington Secretary of State with the following requirements:
- The incorporator signs and files the articles of incorporation with the Secretary of State.
- There must be at least one incorporator, either a natural person of legal age or a corporation.
- The incorporator is not required to be a director, shareholder, or officer, but they may be.
- The articles must include the name and address of the initial registered agent, who must sign the articles, acknowledging acceptance of the appointment.
- The articles must specify the number of shares the corporation is authorized to issue.
The filing fee is $175.
Some other items that aren't required-but which may be included in the articles of incorporation-are:
- The names and addresses of all directors.
- Eligibility requirements to be a director.
- The corporate purpose.
- Circumstances where shareholders can be liable for corporate debts.
- Par value for authorized shares or classes of stock.
- Provisions for managing the business and regulating the affairs of the corporation.
Registered Agent and Office
Washington corporations must have a registered in-state agent-either a natural person who is a resident of Washington or a business entity (corporation or LLC) authorized to conduct business in the Evergreen State. The registered agent must have a business office that is the same as the registered office.
Bylaws
A corporation is required to keep its bylaws available at its primary executive office, but it is not required to file them with the state. The incorporators or board of directors should adopt the corporation's bylaws at their first meeting, insuring that there is no conflict with the corporation's articles of incorporation. They should also keep them updated as time goes on. Bylaws set forth the corporation's basic operating principles from both the managerial and legal perspectives, and should include (as a minimum):
- What authority directors have, how many there are, and how long they serve
- Duties and responsibilities of officers and how long they serve
- How consensus on major decisions is reached, both with and without meetings
- How, when, and where shareholders' and directors' meetings are held
- How the corporation's stock is issued
- Requirements for publishing annual financial information to shareholders
Directors and Officers
The board of directors has the responsibility of making the corporation's major decisions. Officers of the company must be either listed in the bylaws or elected by the board. At least one officer must authenticate the corporation's records, as well as prepare the minutes of directors' and shareholders meetings. Any officer may hold more than one office in the corporation, unless otherwise prohibited by law or the corporation's articles of incorporation or bylaws.
Required Reports
Washington corporations must file a report with the Washington Secretary of State each year that includes the corporation's name, principal office, the names and addresses of directors and officers, and a description of the business. The corporation must also, upon request, send its most recent annual report to a shareholder.
Taxes
Washington State does not have an income tax for individuals or corporations as such. Instead, Washington corporations are subject to Business and Occupation (B&O) tax that depends on the gross revenue received from business activities in Washington. The actual tax rates depend on the type of business activity and its levels.
