Are you looking to form a professional limited liability company (PLLC) in Washington, but you’re not sure how the formation process works? There are several important steps when it comes to creating a Washington PLLC that is compliant and able to do business in the state.
What is a Washington Professional LLC?
The professional limited liability company (PLLC) is a specialized type of LLC that is intended for licensed professionals to offer their unique services. In Washington, a PLLC is an LLC formed to render any type of personal service to the public that requires a license or other legal authorization, such as the services rendered by certified public accountants, chiropractors, dentists, osteopaths, physicians, podiatric physicians and surgeons, chiropodists, architects, veterinarians, and attorneys-at-law.
The Washington PLLC is typically more popular than a professional corporation (PC) because it’s a more flexible business type, but it still includes the personal asset protection and professional qualifications that make the PSC valuable.
PLLCs in Washington have relatively simple formation and maintenance requirements, several options for how they want to be taxed, and flexible management. From one-person businesses to multi-member PLLCs with several owners, the PLLC is a popular choice for a reason.
An important detail of the PLLC that differs from a traditional LLC is that liability protection is not shared across all members of the company. For example, if you operate a PLLC for physicians, your business structure does not shield each individual member from malpractice suits. Instead, each member is liable for their own malpractice insurance, and no member is liable for another member’s malpractice.
Forming a PLLC in Washington (in 6 Steps)
Step One) Choose a PLLC Name
Your PLLC’s name is often the first impression you get to make on potential customers, and therefore it goes without saying that this is an important step. There are a few different aspects to take into consideration when selecting a name for your business:
In the state of Washington, the name of a professional limited liability company generally must contain the words "professional limited liability company,” "professional limited liability" and the abbreviation "Co.,” or the abbreviation "P.L.L.C." or "PLLC." The name of a professional limited liability company organized to render dental services must contain the full names or surnames of all members and no other word than "chartered” or "professional services" or the abbreviation "P.L.L.C." or "PLLC."
Another aspect to consider is including language that explains what your business does. For example, if you’re a doctor, put the word “physician” or the initials “MD” in your PLLC name. Additionally, if your business has strong values like being environmentally friendly, you can indicate that by including the word “green.”
Do You Like It?
At the end of the day, this is your business, and you should choose a name that makes you proud. You should also make sure your PLLC name both sounds good when spoken out loud, and looks good when written down.
The most important consideration for naming a PLLC is to not get too attached to any one business name until you know that it is available for use. You can use the Corporation Search tool on the Washington Secretary of State’s website to check if a business name is available. If you’d like to reserve a business name for future use, you can file a Name Reservation form with the Secretary of State’s Corporation Division for $30. Name reservations are valid for 180 days.
Step Two) Designate a Registered Agent
Every PLLC in Washington is required to designate a registered agent, which is the individual or business entity that receives government correspondence on behalf of your business, then forwards those documents to you.
In Washington, your PLLC’s registered agent may be a commercial registered agent or a non-commercial registered agent. A commercial registered agent is a registered agent that is registered with the Washington Secretary of State as a registered agent.
A non-commercial registered agent can be an individual, a business, or an office or position within your PLLC (such as the Secretary, Member, or Treasurer). The registered agent must provide a physical address in the state of Washington at which the registered agent is available for service of process. A P.O. Box address may also be provided in addition to the physical address for receiving notice.
Without a registered agent, you could lose your good standing with the state of Washington, and the state also has the right to dissolve your PLLC if they decide to. In a worst-case scenario, the state could fail to alert you regarding a lawsuit against your company, which could even lead to a judgment against your business because you didn’t defend yourself.
At the end of the day, we recommend hiring a dedicated registered agent service to handle these requirements. Doing so will help eliminate junk mail and more importantly, keep your personal and/or business address off public record.
Step Three) File Formation Documents with the State
Once you are ready to form your Washington professional limited liability company, you will fill out the Certificate of Formation.
This is THE document that will register your PLLC with the state. You’ll want to ensure all of the following information is correct on the form:
- UBI Number, if available
- Whether a name is reserved, and if so, the reservation number
- Whether your PLLC will render dental services
- Name of your PLLC
- Duration of your PLLC
- Effective date of the Certificate of Formation
- Name and address of your PLLC’s registered agent
- The registered agent’s consent
- Principal office address
- Return address for the filing
- Executor information
The Certificate of Formation can be filed online through the Washington Corporations and Charities Filing System, in person, or by mail.
Cost to Form a PLLC
The filing fee for the Certificate of Formation in Washington is $200 if filed online. If filing in person or by mail, the fee is $180. Expedited processing for paper filings costs an additional $50. If you want your mailed filing to be expedited, you’ll need to include the additional fee and write “EXPEDITE” in bold letters on the outside of the envelope.
Online filings and expedited paper filings are usually processed in less than 2 business days. In person expedited filings received before 3:30 p.m. will be processed the same day, usually within an hour. Regular filings are processed in order of receipt and generally take 1-4 weeks.
Step Four) Create an Operating Agreement
After you register a PLLC in Washington, create a detailed outline that explains how you will run and manage your new business. Even though it doesn’t need to be filed with the state, put one together and keep it for your records.
When you open a bank account, you may be asked for a copy of this document. You’ll also want to keep in mind that any future business partners or managing members may also be interested in seeing your operating agreement before joining your company. After all, this document essentially serves as your overall plan for success.
An attorney can help you outline your operating agreement, or you can create one from a free template online. You can read more about operating agreements here, but some of the basic information you’ll want to have includes:
- Individual members' ownership percentages
- Rights and responsibilities
- Voting powers and meeting guidelines
- Allocation of profits and losses
- Management rules for the PLLC
- Provisions for buying a member owner out, or transferring their shares in the case of illness or death
Step Five) Handle Taxation Requirements
The vast majority of PLLCs require a federal tax ID number, or EIN. An EIN is basically the business version of a social security number, and it’s used for a variety of important PLLC functions.
For instance, you’ll need an EIN if you want to hire any employees, and many banks require them to open business bank accounts as well. You’ll also need one for tax purposes, hence the name federal tax ID number. Get an EIN for your LLC for free through the IRS.
If your PLLC does business in Washington, it will be subject to the business and occupation tax based on your PLLC’s gross income. Other Washington state taxes may also apply, such as sales and use taxes, depending on the nature of your PLLC’s business activities. You can learn more about the business and occupation tax and other Washington state taxes on the Department of Revenue’s website.
Washington does not have a personal or corporate income tax, but if the members of your PLLC reside outside of Washington, they may also be subject to income taxes in their state of residence. Many Washington state taxes can be filed and paid online through the Department of Revenue’s website.
Depending on where in Washington your business is located, you may also need to pay some local taxes. You should contact your PLLC’s city and county to confirm whether your PLLC will be subject to any local taxes. Contact information and local resources for the four largest cities in Washington are available online: Seattle, Spokane, Tacoma, and Vancouver.
Step Six) Obtain Business Licenses and Permits
Many types of businesses in Washington require one or more licenses or permits in order to legally operate in the state. A list of state specialty licenses issued by the State of Washington’s Business Licensing Service is available online. You should also confirm whether you need any local licenses or permits. If needed, the Washington Department of Revenue’s Business Licensing Wizard can help you identify the business licensing requirements for your PLLC.
In addition, you should confirm you have all professional licenses required to render professional services through your PLLC. The Washington State Department of Licensing’s website includes a list of professional licenses, with links to the regulatory body overseeing each profession.
Would You Prefer a Professional Form Your PLLC?
If you would prefer to have a professional handle the paperwork for you, consider hiring an online business formation service.
Because of the often-complex nature of professional limited liability companies, some of our favorite service providers don’t offer PLLC formations, but there are still plenty of quality companies that do provide this service. A couple of our favorites for PLLC formation are LegalZoom and MyCorporation.
Another option would be to hire a business attorney to handle your PLLC formation. While this is certainly a more expensive route than using an online formation service, a lawyer’s expertise could come in handy when you’re forming a specialized business structure like this.
Next Steps: What to Do After Creating a PLLC in Washington
Open a business bank account
We highly recommend that you establish a separate business banking account so that your business and personal finances are maintained completely separate. This is important because it helps protect your personal assets and also makes filing taxes much easier. Once you receive your EIN from the IRS, you’ll be able to use it to establish an account at the bank or credit union of your choice.
In Washington, employers are required to provide workers’ compensation insurance for their employees. This coverage is purchased through the Department of Labor & Industries, or L&I. If you plan to hire employees for your PLLC, you’ll need to open a workers’ compensation account with L&I. You can learn more about this process and get additional information about workers’ compensation in Washington on L&I’s website. Though not required, it’s probably also a good idea to pursue general liability insurance, as well as some industry-specific policies pertaining to the profession practiced by your PLLC.
Understand income reporting
Income reporting is just what it sounds like – reporting the income you made from your business. It’s important to note that you must file this form whether you made or lost money over the course of the year.
Your PLLC’s income will be reported on a federal level and, if your PLLC’s income meets certain criteria, on a state level. While Washington does not have state income tax, your PLLC may be subject to the business and occupation tax, which requires reporting your PLLC’s gross income. Filing options and forms are available on the Washington Department of Revenue’s website.
Understand annual reporting
In Washington, your PLLC will be required to file an Annual Report with the Secretary of State’s Corporation Division. The Annual Report contains basic information about your PLLC and can be filed by paper or online. The filing fee is $60.
Find an accountant
We don’t recommend that you attempt to manage your business finances without the help of a professional. There is too much room for error, and a professional can ultimately save you time and money by guiding you on how to best manage your business finances. At a minimum, enlist professional help to set you up with software and the steps for keeping up with your finances on a regular basis. Then, consult back with your accountant at least a couple of times per year – and especially at tax time – to ensure you’re keeping track of everything correctly.