No personal income tax sounds like an easy win until you realize Washington makes up for it by taxing business revenue directly, through a mechanism called the B&O tax. The math works differently here than in most states, and it's worth understanding before you file anything. Below is what forming and running a business in Washington actually takes in 2026.
1. Which business structure fits you?
These are the options on the table before filing anything:
- Sole proprietorship. You and the business are one legal entity, so there's no filing required to begin. It's simple, but liability for anything the business owes falls on you personally.
- Partnership. Two or more people running a business jointly, carrying the same liability exposure as a sole proprietor, just divided among the partners.
- LLC. What most small Washington businesses choose, mainly because it separates your personal assets from the company's debts and legal liabilities.
- Corporation, S-corp or C-corp. Requires more paperwork and formal structure, generally worthwhile once you bring on investors or multiple shareholders.
See our guide on choosing a business structure for the fuller comparison.
Only LLCs and corporations register with the Washington Secretary of State's Corporations and Charities Division, the agency handling business filings statewide. Sole proprietorships and general partnerships aren't required to register there.
2. Register your business
Forming an LLC
A Washington LLC is formed by filing a Certificate of Formation with the Secretary of State. The fee runs $180 to $200 depending on how you file, and online approval through the Corporations and Charities Filing System usually takes about 5 business days.
Within 120 days of forming, you're also required to file an Initial Report, which comes at no cost if you bundle it with your Certificate of Formation.
A registered agent with a physical Washington address, available during business hours, is required for every LLC. You can serve as your own agent or bring in a commercial service instead.
Washington doesn't legally require an operating agreement, but it's still smart to write one, particularly for multi-member LLCs, since it's what determines how decisions and profits get split.
Sole proprietorships and DBAs
Sole proprietorships file no formation document with the Secretary of State. That said, every business, including a sole proprietorship operating under a trade name, has to register for a state business license through the Department of Revenue.
3. Get an EIN
An Employer Identification Number costs nothing through the IRS and takes about 15 minutes online. You'll need one to open a business bank account, hire anyone, or file most business tax forms, even if you're running a single-member LLC with no employees.
4. Check licenses and permits
Like most states, Washington has no single all-purpose business license, but nearly every business does need the statewide business license issued through the Department of Revenue's Master Business Application, plus whatever city-level license your municipality requires on top of that. Our guides on professional licensing by industry and zoning laws for home businesses cover both in more depth.
5. Understand Washington taxes
There's no state personal or corporate income tax in Washington, so LLC members owe the state nothing directly on their share of profits. Instead, the state runs the Business and Occupation (B&O) tax, assessed on gross receipts rather than net profit, with rates that shift by activity: around 0.471% for retail, 0.484% for wholesale and manufacturing, and 1.5% to 2.1% for services, tiered by revenue. Most very small businesses fall under a threshold that exempts them from filing at all.
Sales tax opens at a 6.5% state base, and local additions bring the combined rate to somewhere between 7% and 10.5% depending on location.
6. Stay compliant
Every Washington LLC files an Annual Report with the Secretary of State, due by the last day of the month it was originally formed, for a $70 fee. Miss it and a $25 delinquency fee gets added; keep ignoring it and the state can administratively dissolve the LLC.
Washington business costs at a glance
| Item | Cost |
|---|---|
| Certificate of Formation (LLC) | $180 to $200 |
| Annual Report (every year) | $70 |
| State business license (first year) | ~$50 to $90 |
| Registered agent service (optional) | $50 to $300/year |
| EIN | Free (IRS) |
| State income tax | None (B&O tax on gross receipts instead) |
| State sales tax | 6.5% + local, up to ~10.5% |
Frequently asked questions
Does Washington have personal income tax?
No. There's no state personal or corporate income tax at all.
What is Washington's B&O tax?
The Business and Occupation tax, levied on gross receipts rather than net profit. Rates vary by activity: roughly 0.471% for retail, 0.484% for wholesale, and 1.5% to 2.1% for services.
How much does it cost to form an LLC in Washington?
$180 to $200 for a Certificate of Formation, depending on the filing method.
When is Washington's Annual Report due?
The last day of the month the LLC was originally formed, and it costs $70.
Does Washington require an Initial Report?
Yes, due within 120 days of formation, though it's free when bundled with the Certificate of Formation.
Fees and rates above come from the Washington Secretary of State and Department of Revenue as of 2026, and both are subject to change, so confirm current figures before filing. None of this is legal or tax advice. Talk to a Washington-licensed attorney or CPA about your specific situation.