Below is an outline of some of the steps that you need to take. Some of them are legally required. Others aren’t mandatory, but they’re highly recommended by experts anyway.
Please just keep in mind that, while we’ve made every effort to ensure that this information is up-to-date and accurate, it doesn’t constitute legal advice, and it shouldn’t be considered a substitute for legal advice. Always consult with your attorney to get answers to your questions regarding your LLC.
Step 1: Draft and Sign an LLC Operating AgreementFirst up, let’s discuss the need to draft and sign an LLC operating agreement.
What’s an operating agreement? It’s basically a legal document that will establish how your LLC will be run. So, for example, it will include how decisions will be made, how money will be distributed, and how disputes will be resolved. Lots of detail here, so take your time as you draft it, and really think about what you’re putting into your operating agreement.
All of the members of your LLC will need to sign the agreement and agree to follow the rules that it contains. Obviously, if you’re the only member of your LLC, you’ll be the only one who needs to sign it and follow it.
An operating agreement isn’t mandatory, but it’s a great idea to have one in place, even if your LLC only has one member and you’ll be in charge of making all of the decisions. Why is this the case? Well, having this written operating agreement lends credibility to your LLC. It also helps show that your LLC is a legitimate business entity that’s separate from you, not just some sham that’s been created to avoid liability—really important for single member LLCs (SMLLCs) because, without the formality of an agreement, an SMLLC can appear like a sole proprietorship, which doesn’t provide limited liability. Plus, lenders might ask to see an operating agreement before they’ll agree to issue you a loan in your LLC’s name, so if you’re planning on taking out loans to build your business, this simple document will definitely be helpful.
The good news is that your operating agreement doesn’t need to be complex or long, especially if you’re an SMLLC. And, while you don’t need to file the agreement with the Secretary of State—or anywhere else, for that matter—you should keep this document with all of your other important LLC files.
Step 2: Get a Federal Tax ID (EIN)Next up is the Federal Tax ID (or Employer Identification Number / EIN).
You should obtain an EIN from the IRS. This nine-digit number will be used by the IRS to identify your LLC, so you’ll need to include it in all of your tax forms and communications with the IRS and the Washington Department of Revenue.
If your SMLLC doesn’t have any employees, a separate EIN is, generally, not required by the IRS. Instead, you can use your personal Social Security number. But it’s still recommended that you get an EIN.
Why is an EIN an important part of doing business? First off, it helps prove that your LLC is a legal entity that’s separate from you personally, just like the operating agreement discussed above. Plus, using your EIN rather than your Social Security number can be a smart step in avoiding identity theft, which is frighteningly common today. And, on top of all of that, many banks will actually require an EIN when you’re ready to open up a business bank account in your LLC’s name.
Thankfully, it’s easy to get an EIN, and it’s free as well. While you can complete an online application at the IRS website, you can also use a service like Hyke, which will do all of the work for you.
For additional information, see our article, Freelancer’s Guide to EIN (Federal Tax ID).
Step 3: Get a Business LicenseVirtually every business in Washington must get a general business license from the State of Washington. You’ll likely need to get a local (city or county) business license as well.
As is the case with an operating agreement and EIN, obtaining all required business licenses helps prove that your LLC is legitimate. It also helps preserve your limited liability. And, more importantly, if the State of Washington or your local government finds out that you failed to get a required license to run your company, it will impose penalties and fines that cost a lot more than it would’ve cost you to just get the license in the first place.
In addition to a general business license and local business license, you might also need to get an occupational license or permit from the State of Washington, or even from the federal government. This will depend on the work that you do. For example, real estate brokers and salespeople must be licensed by the state.
Don’t fret, obtaining business licenses in Washington state is usually simple and straightforward. The State of Washington has an online Business Licensing Wizard you can use to determine which licenses you need and where to get them. Once you know what you need, you’ll have to fill out an application and pay a fee.
Pro tip: when you sign up with a Hyke account, we help you obtain the appropriate business license(s), so it’s one less thing that you need to worry about.
Want more information on business licenses? Check out our article, Freelancer’s Guide to Business Licenses in Washington.
Step 4: File the Statement of InformationWithin 120 days after filing your certificate of formation, you’re required to file an Annual Report with the Secretary of State. Subsequent annual reports are due on dates determined by the Secretary of State. The Annual Report must be filed online. Expect to pay a fee of $60 to file it.
What’s the purpose of the Annual Report? Well, it’s used to keep your LLC’s contact information up-to-date in the Secretary of State’s records. Simple enough, right?
What does the Annual Report need to include? Basically, all you have to provide is your LLC’s address, your registered agent’s name and address, and your members’ names and addresses.
It can be hard to remember to file your Annual Report, but if you have a Hyke account, we’ll make sure you don’t miss any important documents of deadlines for forming and maintaining your LLC.
Step 5: Open a Business Bank AccountIt’s highly recommended that you open a bank account in your LLC’s name, rather than use your personal bank account for business purposes.
Once again, it boils down to ensuring that your LLC is recognized as a separate, legal entity that’s a legitimate business. Combining your personal funds with your LLC’s funds in a single account, therefore, is a bad idea.
If you use your personal bank account for business purposes, you might even end up losing the limited liability that you obtained by creating your LLC. You definitely don’t want that!
Setting up a business bank account might seem daunting at first, but you can read through our article, Freelancer’s Guide to Banking to learn more. You can also sign up with Hyke, as we’ll help you set up a business bank account that you can use for profits and expenses.
Step 6 (Optional): File a Trade Name RegistrationDid you know that you aren’t required to operate your LLC under the legal name that’s listed in your articles of organization? It’s true; you can use a different name. This name is referred to as a trade name, or dba, which stands for “doing business as.”
In order to operate under a different name than your LLC’s legal name, you have to register your trade name with the State of Washington Business Licensing Service. Once this registration is completed, your trade name is good throughout the state. You can register at the same time you file your state Business License Application with the Business Licensing Service, or do so later by filing new application. You can register online or by mail. There is a $5 fee per name.
You can also learn more about naming your LLC by reading our article, “Freelancer’s Guide to Naming an LLC in Washington.”
Maintaining Your LLC Doesn’t Have to Be ComplicatedWow, those are a lot of rules! But try to relax, and just take things one step at a time so that you don’t become overwhelmed. Also, know that Hyke is here for you to help you through all of the important steps above. With the right strategy, and the right support, you can rest assured that your LLC will have everything it needs to operate legally and be recognized as the legitimate business that it is.
Stephen has dedicated his career as an attorney and author to writing useful, authoritative and recognized guides on taxes and business law for small businesses, entrepreneurs, independent contractors, and freelancers. He is the author of over 20 books and hundreds of articles and has been quoted in The New York Times, Wall Street Journal, Chicago Tribune, and many other publications. Among his books are Deduct It! Lower Your Small Business Taxes, Working with Independent Contractors, and Working for Yourself: Law and Taxes for Independent Contractors, Freelancers & Consultants.