Last updated: February 25, 2026
Washington is one of the few states with no personal or corporate income tax, making it a top destination for entrepreneurs. Instead, the state uses a Business & Occupation (B&O) tax on gross receipts and a retail sales tax. LLC formation costs $200 online through the Secretary of State, and the annual report is just $70. With a booming tech sector, strong population growth, and access to Pacific Rim trade, Washington offers excellent opportunities across every industry.
That said, Washington has unique tax structures you need to understand – particularly the B&O tax (which taxes gross receipts, not profits) and one of the highest combined sales tax rates in the country. Workers’ compensation is handled exclusively through the state fund at the Department of Labor & Industries (L&I), not through private insurers. This guide walks you through every step using information from official Washington government sources.
How to Start a Business in Washington (Step by Step)
Step 1: Choose Your Business Structure
Your business structure determines your personal liability, tax treatment, and paperwork requirements. The most common options in Washington:
- Sole Proprietorship – Simplest to start, but you’re personally liable for all business debts. No state formation filing required (just register for a business license).
- LLC (Limited Liability Company) – Most popular choice for small businesses. Protects personal assets, offers flexible tax treatment, and Washington’s lack of income tax makes pass-through taxation especially attractive.
- Corporation (S-Corp or C-Corp) – More formal structure with shareholders, directors, and officers. Better for businesses seeking investors.
- Partnership – For businesses with two or more owners. Options include general partnership (GP), limited partnership (LP), or limited liability partnership (LLP).
For most small businesses, an LLC is the right choice. Washington’s lack of income tax means LLC members keep more of their earnings compared to most other states.
Step 2: Register Your Business with the State
LLC Formation via the Secretary of State
Washington business entities are registered through the Secretary of State at sos.wa.gov. Online filings are handled through the Corporations and Charities Filing System (CCFS).
| Item | Cost |
|---|---|
| Certificate of Formation (online) | $200 |
| Certificate of Formation (paper/mail) | $180 |
| Expedited processing (optional) | +$100 (3 business days) |
| Same-day processing (optional) | +$150 |
| Initial Report | Included with online filing (or $10 if filed separately within 120 days) |
| Annual Report | $70/year |
How to file:
- Go to sos.wa.gov and file a Certificate of Formation online or by mail
- Choose a business name that includes “LLC,” “L.L.C.,” or “Limited Liability Company” – check name availability through the SOS business entity search
- Designate a registered agent with a physical Washington address
- Pay the $200 filing fee – online filings include the Initial Report
- As of January 20, 2026, filings without a required email address will be rejected
Annual Report
Washington LLCs must file an Annual Report each year for $70. The due date is based on your LLC’s formation date. Failure to file can result in administrative dissolution.
Washington State Business License (UBI Number)
Every business operating in Washington needs a Unified Business Identifier (UBI) number from the Department of Revenue. Apply through the Business License Application (BLA). The UBI registers you with multiple state agencies simultaneously. Processing takes approximately 10 business days.
Trade Name (DBA)
If your LLC operates under a name different from its legal name, register a trade name with the Department of Revenue through the Business License Application.
Federal EIN (Employer Identification Number)
After forming your LLC, apply for a free EIN from the IRS at IRS.gov. You’ll receive it immediately when applying online. You need an EIN to open a business bank account, hire employees, and file taxes.
Step 3: Get Required Licenses & Permits
State Business License
Washington requires a state business license for nearly all businesses. This is obtained through the Business License Application (BLA) from the Department of Revenue, which also registers you for applicable taxes. Some cities and counties require additional local business licenses or endorsements.
Industry-Specific Licenses
Many industries require state-level licenses from specific agencies. The Department of Licensing (DOL) licenses cosmetologists, private investigators, and other professionals. Labor & Industries (L&I) handles contractor registration and electrical specialty licenses. The Department of Children, Youth, and Families (DCYF) licenses childcare providers. See our industry-specific guides below for detailed requirements.
Step 4: Register for State Taxes
No State Income Tax
Washington has no personal or corporate income tax – one of only nine states without one. LLC members do not pay state income tax on their business earnings. This is one of Washington’s biggest advantages for business owners.
Business & Occupation (B&O) Tax
Instead of an income tax, Washington levies a Business & Occupation (B&O) tax on gross receipts. This is a tax on your total revenue, not profits – you cannot deduct expenses. Rates vary by business classification:
- Retailing: 0.471%
- Manufacturing/Wholesaling: 0.484%
- Service & Other Activities (under $1M gross): 1.5%
- Service & Other Activities ($1M-$5M gross): 1.75%
- Service & Other Activities ($5M+ gross): 2.1%
Small businesses with gross income under $28,000/year (or $46,667/year for service businesses) may qualify for the Small Business B&O Tax Credit, which can eliminate your B&O tax liability entirely. Register through the Department of Revenue (DOR).
Retail Sales Tax
Washington has one of the highest sales tax rates in the country:
- State rate: 6.5%
- Local rates: Up to ~4.1% additional
- Combined range: 7.0%-10.6% (Seattle is 10.35%)
Not all services are subject to sales tax – the rules vary by industry. Use DOR’s tax rate lookup tool to find your exact local rate.
Employer Taxes (If Hiring Employees)
If you hire employees, register with the Employment Security Department (ESD) for unemployment insurance:
- Unemployment Insurance Tax: New employers start at approximately 2.7% on the first $72,800 per employee per year (one of the highest taxable wage bases in the country)
- Paid Family & Medical Leave: 0.74% of wages (split between employer and employee)
- Workers’ Compensation: Premiums paid to L&I (see below)
Report new hires to the Washington New Hire Reporting Program within 20 days of the hire date.
Step 5: Get Business Insurance
Workers’ Compensation Insurance
Washington requires workers’ compensation insurance for all employers with one or more employees. Washington is a monopolistic state fund state – you must purchase workers’ comp coverage through L&I or be a certified self-insured employer. Private insurance carriers cannot provide workers’ comp in Washington.
| Status | Requirement |
|---|---|
| Any employer with 1+ employees | Workers’ comp through L&I is mandatory |
| Part-time, seasonal, temporary workers | All count – coverage required |
| Sole proprietors with no employees | Not required (may opt in) |
| LLC members, corporate officers | May exclude themselves from coverage |
| Average premium rate (2025) | $1.48 per hour worked |
Penalties for non-compliance: Up to $250 per day for each day without coverage, with a maximum penalty of $50,000. The Department of Labor & Industries (L&I) enforces these requirements.
General Liability Insurance
While not always legally mandated, general liability insurance is practically essential. Many clients, landlords, and government contracts require proof of coverage. Industry standard: $1 million per occurrence / $2 million aggregate.
Washington Business Guides by Industry
Every industry has different licensing, permit, and insurance requirements. Choose your business type for a detailed breakdown of everything you need in Washington:
- How to Start a Cleaning Service in Washington – B&O tax classification, insurance, bonding, and cost breakdown
- How to Start a Food Truck in Washington – County health permits, food worker cards, L&I inspection, and commissary requirements
- How to Start a Daycare in Washington – DCYF licensing, MERIT background checks, staff ratios, and training requirements
- How to Start an HVAC Business in Washington – L&I electrical specialty license, contractor registration, bonding, and insurance
- How to Start a Hair Salon in Washington – DOL cosmetology license, salon permit, exam requirements, and costs
- How to Start a Landscaping Business in Washington – WSDA pesticide certification, contractor registration, and insurance
- How to Start a Private Investigation Business in Washington – DOL licensing, experience requirements, armed endorsement, and insurance
Washington Business Resources & Official Links
| Resource | What It’s For |
|---|---|
| Washington Secretary of State | LLC/Corp formation, entity search, annual reports |
| Department of Revenue (DOR) | Business license (UBI), B&O tax, sales tax registration |
| Dept. of Labor & Industries (L&I) | Workers’ comp, contractor registration, electrical licenses |
| Employment Security Dept. (ESD) | Unemployment insurance, employer tax registration |
| Department of Licensing (DOL) | Professional licenses (cosmetology, PI, real estate) |
| Dept. of Children, Youth & Families (DCYF) | Childcare licensing |
| Dept. of Agriculture (WSDA) | Pesticide applicator licensing, food safety |
| Department of Health (DOH) | Food worker cards, health regulations |
| IRS EIN Application | Free federal tax ID number |
Frequently Asked Questions
How much does it cost to start an LLC in Washington?
The filing fee for a Certificate of Formation is $200 online ($180 by mail). The annual report costs $70/year. With a free EIN from the IRS, your total first-year cost is as low as $270. Expedited processing is available for an additional $100 (3 days) or $150 (same-day).
Does Washington have a state income tax?
No. Washington is one of only nine states with no personal or corporate income tax. LLC members do not pay state income tax on business earnings. Instead, Washington uses a Business & Occupation (B&O) tax on gross receipts and a retail sales tax.
What is Washington’s B&O tax?
The Business & Occupation (B&O) tax is levied on gross receipts – your total revenue before expenses. Rates depend on your business classification: retailing (0.471%), manufacturing/wholesaling (0.484%), and service & other activities (1.5%-2.1% depending on gross income). Small businesses under $28,000/year may qualify for a tax credit that eliminates B&O liability.
Is workers’ compensation required in Washington?
Yes – and it must be purchased through the state fund (L&I). Washington is a monopolistic state – private insurers cannot provide workers’ comp. All employers with one or more employees must have coverage. Penalties are up to $250/day without coverage, maximum $50,000.
Do Washington LLCs need to file annual reports?
Yes. Washington LLCs must file an annual report for $70 each year. The due date is based on your LLC’s formation date. Failure to file can result in administrative dissolution of your LLC.
What is a UBI number in Washington?
A Unified Business Identifier (UBI) is a nine-digit number that registers your business with multiple Washington state agencies. You get it by filing a Business License Application (BLA) with the Department of Revenue. Nearly all businesses operating in Washington need a UBI number.
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