You’ve decided to form a Washington limited liability company (LLC). LLCs are a popular choice of entity because they offer the liability protection of a corporation, but with more flexibility when it comes to management structure and tax treatment, among other things.
Related: Benefits Of S Corporation Tax Treatment For Washington LLCs
So far so good. But what steps do you need to take to form the LLC?
Pick A State. But Not Just Any State.
Presumably you’ve selected to form your LLC in Washington State. If you plan to do business primarily or exclusively in Washington, then this is probably the right choice.
However, you should be aware that, for a number of reasons (some good, others not), companies often form in Delaware, even if they have no affiliation with the state.
Don’t feel the need to follow the herd in doing this. If you decide to, make sure there’s a good reason for doing so. For example, if you’re a startup and plan to seek venture capital from investors in New York or California, that may be a good reason to form in Delaware, as these investors and their attorneys will be most familiar with that state’s well-defined body of corporate law.
Photo: Matthew Crisp | Flickr
Tip: If you’re planning to seek venture capital, you should consider forming a corporation, rather than an LLC, as future investors will almost certainly insist on your company being incorporated before they invest.
If you do form your LLC in another state, you’ll also need to register as a foreign entity in Washington.
Related: 4 Steps To Register An Out-Of-State Business in Washington State
Pick a Name. But Not Just Any Name.
Next, you’ll want to choose a name for your company. But before you rush to order custom letterhead, you’ll want to determine whether the name is available in Washington and in any other states where your LLC may qualify to do business.
In Washington, you can see if your chosen name is available on the secretary of state’s website. You’ll also want to decide whether the name will be used as a separate domain name, trademark, or service mark. If so, you should consider running a separate search see if there are similar names already in the marketplace.
Related: Trademark Search & Clearance
You should also always make sure the name meets any statutory requirements in Washington, which may involve consulting with a Seattle business attorney.
Draft the Certificate of Formation.
Next, you’ll need to prepare the certificate of formation. Washington has a form certificate that helps explain what content must be included. You’ll need to make several decisions at this point, including who will sign the certificate of formation as the authorized person(s), who will act as the registered agent for the LLC, and where the LLC’s principal office street address will be.
File the Certificate of Formation.
Washington makes filing the certificate of formation easy: you can file online with the secretary of state and pay the $200 filing fee. Alternatively, you can mail a paper certificate to the secretary of state and pay a lower fee of $180.
Tip: The convenience of online filing, for most, makes it worth paying the extra $20 filing fee.
Other states may handle the filing process differently, so make sure to do your own research or consult an attorney if you’re filing elsewhere.
Draft the LLC Operating Agreement.
At long last, the LLC operating agreement. This is a crucial document. It allows the members of the LLC to memorialize private agreements among themselves on key issues like management, capital contributions, allocation of profits, dissolution, and much more.
While this can be done without the help of an attorney, it can be risky and time-consuming to go it alone, particularly if the LLC has more than a few members or a complicated structure. Getting an attorney involved can also help the members to confront difficult questions, like how to handle management disputes, that they might otherwise avoid discussing in an effort to avoid ruffling any feathers in the early stages.
Tie Up Loose Ends.
Once the LLC has been formed, there may still be a number of other details to attend to, like preparing a minute book, applying for an employer identification number with the IRS, obtaining any required state or county business licenses, filing the LLC’s initial report, and more.
Related: Dissolving A Washington LLC
