If you’re thinking about starting a business, you may wonder, how much does it cost to set up an LLC in Washington State? The cost of filing forms and paying fees to set up a limited liability company (LLC) is tiny, compared to all the other expenses you may face when starting a business.
The business law attorneys of Dickson Frohlich Phillips Burgess offer a wide range of services to those who own or plan to start a business. Our attorneys have more than a hundred years of combined experience helping business clients of all sizes. Call us today at 206-621-1110 to learn more.
Is an LLC Right for You?
An LLC is a business structure with many of a corporation’s benefits and with the tax advantages and flexibility of a partnership. There are several options for business entities, each with its own benefits and drawbacks.
- LLC – It can have one or more members who own the LLC. All or designated members can manage it. There’s no double taxation like a corporation. Members’ income is taxed at a rate based on their annual earnings from all income sources. They are not liable for business debts
- Corporation – Owned by one or more shareholders. It’s more complex than an LLC. You must have annual meetings and legal documentation (like corporate resolutions) for the simplest functions. The corporation is taxed at the corporate tax rate and shareholders are taxed on the dividends they receive. Generally, this business entity is best if there’s more than a hundred shareholders or you’re planning to raise a lot of investment capital
- Subchapter S Corporation – A type of corporation, but with a flow–through taxation mechanism like an LLC. The Internal Revenue Service restricts who’s eligible to be a Subchapter S Corporation. There are some tax benefits, because it allows for certain savings for self-employment taxes
- Partnership – Has two or more owners. Each partner is liable for the other’s acts and decisions. Partners also face personal liability that a corporation or LLC may shield. There’s more freedom and less paperwork than in other business forms
- Sole Proprietor – You are the owner and there’s no need to file reports, create an entity, or deal with corporate income taxes. It’s the least complicated way to do business, but you are potentially personally liable for your business’s debts and liabilities
What is the Average Cost to Set Up an LLC?
The cost varies with your location. There are many steps and legal documents needed to set up an LLC.
1. Certificate of Formation
The LLC is filed with the Secretary of State and you pay the $180 filing fee. This can be done by fax, by mail, in person, or online. This document includes:
- Entity’s name
- Address of the principal place of business
- Registered agent’s name, signature, and address
- Duration of the LLC (perpetual or limited)
- Effective date (date of filing or later)
- Signature of the person starting the LLC (known as the executor).
The state will give you a unified business identifier number. It acts as a tax registration number for the Washington Department of Revenue and an identifier for other state business licenses.
2. County and Local Business License
The counties and cities where you’re based and do business probably require a business license. A professional license may also be needed, depending on what your LLC does. The costs vary. A local business license (also called an endorsement) may cost $50. It must be renewed, so there’s an ongoing cost.
Your LLC must file an annual report (or annual renewal) with the Secretary of State. The cost is $71 plus the cost of the City Endorsement renewal.
4. Commercial Registered Agent
A registered agent is required for an LLC. It gives state government, tax authorities, private citizens, and other companies a permanent, reliable location to send mail and legal documents. A third-party company specializing in acting as a registered agent may cost $125 annually.
Starting a Business? What Will Your Costs Be?
What is the average cost to set up an LLC? Setting it up is just the beginning. Most people creating an LLC are either switching an existing business from another entity or starting a new business. If you’re planning a new venture, the Small Business Administration (SBA) states that understanding your expenses will increase the chances that your business will launch successfully.
Calculating these costs will help you:
- Estimate your profit
- Calculate the income needed to break even
- Obtain loans
- Attract investors
- Determine your tax deductions
Most businesses are brick-and-mortar locations, conduct business online, or provide a service. Increasingly these lines are blurring, so you may also be any combination of the three. Some costs are applicable to all three; others are unique to that type. Some expenses are well-defined and relatively fixed (permits and licenses), while others are less certain (salaries and utilities).
After identifying your business expenses, organize them into one-time and monthly expenses. One-time expenses are initial costs to start your business (they may be tax deductible). Monthly expenses are salaries, rent, insurance, marketing, and utility bills.
The SBA offers this form to help you think about and calculate your business expenses.
Starting a Business? Dickson Frohlich Phillips Burgess Can Help.
You’re investing too much money, energy, and time into your business to risk serious legal mistakes. Choose an experienced corporate law firm to help your business start and grow. For decades, we’ve provided legal services to companies of all sizes in the Seattle and Tacoma area.
Call us now at 206-621-1110 for a telephone consultation to help you decide if our firm is right for you and your business. We have reasonable rates and provide personalized service. If your business is in the Seattle or Tacoma area, the experienced corporate attorneys at Dickson Frohlich Phillips Burgess can help get your LLC off the ground.