Obtain a Tax ID (EIN) Number and Register Your Business in Washington
Every year, millions of people come up with business ideas, but only some of them ever turn that idea into something tangible. The process to become an entrepreneur is a challenging one, but it’s not as intimidating as you might think. In fact, with a handful of basic prerequisites, and a strong business plan backing you up, almost anyone can become an entrepreneur in Washington.
Steps to getting a Tax ID (EIN) Number and Register Your Business in Washington
- Washington Means Business
- Forming a Business in Washington
- Federal Tax ID (EIN) Number Obtainment
- Washington State Tax ID Number
- Localized Licenses and Permits in Washington
1. Washington Means Business
You might think of Silicon Valley as the nation’s only major hub of startup activity, but there are many cities around the country that pride themselves on supporting small businesses and entrepreneurs- and several of them are in Washington. Seattle, Spokane, Tacoma, and Olympia in particular are friendly to business owners, with entrepreneurial communities and organizations designed to provide resources and contacts to entrepreneurs, like SCORE, BNI, SBA community groups, and local chambers of commerce.
More than 1.3 million workers in Washington already work for small businesses, of which there are more than 590,000. Washington’s economic growth rate is also one of the best in the country, giving entrepreneurs even more opportunities to work with. No matter what your idea is, or how you plan on fitting into the state, there’s a good network of resources, partners, and clients to work with.
2. Forming a Business in Washington
It is recommended that you create a business plan. It’s the single greatest resource you’ll have in the formation of your company, since it will chart out all your strengths and weaknesses, provide the blueprint for your infrastructure, and even provide financial projections so you can plan for the future effectively.
As you sketch out your business plan, or after you’ve finalized it, you’ll need to decide what type of business you want to form. There are many options here, including sole proprietorships, partnerships, limited liability companies (LLCs), C-corporations, and S-corporations, but there’s no one "right" answer. Instead, you’ll need to base your decision on your tax and liability needs, as well as the complexities associated with each structure.
In terms of liability protection, there’s nothing better than a corporation. Both C-corporations and S-corporations are treated as distinct legal entities, meaning their owners are shielded from debt and most legal vulnerabilities (the main difference between them is the number of allowed shareholders). LLCs are also treated as a distinct entity, but aren’t quite as powerful as a full-fledged corporation. In partnerships and sole proprietorships, you could be held personally liable for pretty much anything.
Taxes are a bit more complicated. In sole proprietorships and partnerships, you’ll be responsible for paying taxes on any money you make- as if it’s personal income. LLCs and corporations are treated as pass-through entities; in the latter case, your company will be responsible for paying taxes on eligible income. In both cases, you’ll pay personal taxes on any money you make from the company, including any salary or payments you withdraw, as well as recognized profits.
In terms of simplicity, sole proprietorships and partnerships offer the most straightforward path of development and expansion. LLCs and corporations must file annual reports in Washington, and are somewhat more complex to create and maintain.
Washington is an interesting exception to the usual rules of state taxes; there aren’t any personal or business income taxes to pay in the state. In the place of traditional state taxes, you’re responsible for paying the Business and Occupation (B&O) tax, which is a tax on your business’s gross revenue. Some cities within the state also impose their own local B&O taxes.
3. Federal Tax ID (EIN) Number Obtainment
Before you hire an employee, open a bank account, or take any other major action in your business, you should get your federal tax ID. otherwise known as your employer identification number (EIN). As the name implies, this is a signature string of numbers that identifies your business, and registers it with the federal government.
Its most basic functions are keeping track of your financials and establishing your business as a separate entity, but you’ll also find uses for it throughout your course of business development. For example, your vendors and partners may ask for your EIN in their applications and contracts, and you may be required to provide it when opening a bank account.
If you’re eager to get your federal ID number as quickly as possible, you should make use of our federal EIN obtainment services. With a few basic pieces of information, we can get you set up in just a few hours.
4. Washington State Tax ID Number
Washington’s state taxes for businesses are unusual, but you’ll still need to register your business with the state. If you plan on selling any retail item or product, or if you’re engaging in any business that requires paying state taxes (such as fishing, timber, or public utility operations), you’ll need a Washington state tax ID.
Your Washington state tax ID is very similar to your federal tax ID, though you probably won’t use it as often. Fortunately, the process to get one is fairly straightforward. Sign up for our Washington state tax ID obtainment service, and we’ll get you everything you need in a day or less.
5. Localized Licenses and Permits in Washington
Licenses and permits in Washington are mostly handled at the local level; each city has its own requirements for which types of businesses require licensure, and how those licenses are processed. For example, if your business plans on selling alcohol, you’ll almost certainly need a liquor license, but the availability of liquor licenses, and the stipulations of those licenses, may vary by city.
There are dozens of categories and hundreds of cities in Washington, so there’s way to cover every possibility. Instead, your best course of action is to use Washington’s dedicated app, designed to help you learn which licenses you need, and connect you with the resources necessary to obtain them.
Once you’ve gotten your business registered with both the federal and Washington state government, you can start focusing on developing your infrastructure and generating revenue. Remember, if you want to make things simple, let us handle your federal tax ID and Washington state tax ID obtainment- you’re just a couple of clicks away!