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Washington LLC |
An Washington LLC satisfies a necessary condition of your business planning developement in that it meets the requirement that you establish a legal form of organization in order to gain the statutory benefits and protection available in Washington to your LLC. Your Washington LLC establishes a legal presence within the state, which you can use either
as a platform for in-state operations or by registering your Washington LLC via your agent's physical address in order to
meet the purely statutory requirement for tax and filing purposes absent an in state operation.
Advantages and Disadvantages of a Washington LLC
Advantages of Limited Liability Company
- Limited Liability: Owners of a LLC have the limited liability protection of a corporation.
- Flexible Profit Distribution: Limited liability companies can select varying forms of distribution of profits. Unlike a common partnership where the split is 50-50, LLC have much more flexibility.
- No Minutes: Corporations are required to keep formal minutes, have meetings, and record resolutions. The LLC business structure requires no corporate minutes or resolutions and is easier to operate.
- Flow Through Taxation: All your business losses, profits, and expenses flow through the company to the individual members. You avoid the double taxation of paying corporate tax and individual tax. Usually, this will be a tax advantage, but circumstances can favor a corporate tax structure.
Disadvantages of Limited Liability Company
- Limited Life: Corporations can live forever, whereas a LLC is dissolved when a member dies or undergoes bankruptcy.
- Going Public: Business owners with plans to take their company public, or issuing employee shares in the future, may be best served by choosing a corporate business structure.
- Added Complexity: Running a sole-proprietorship or partnership will have less paperwork and complexity. A LLC may federally be classified as a sole-proprietorship, partnership, or corporation for tax purposes. Classification can be selected or a default may apply.
By Washington and other state law in order to proceed with forming a llc, you need to prepare a written abstract detailing your llc purpose, the names of your initial Washington LLC members, the name and address of your Washington registered agent, the details of which will be introduced into the body of your LLC operating agreement and related Washington LLC formation documents assembled for application to the state of Washington.
Washington’s Business Tax Climate Ranks 9th
Washington ranks 9th in the Tax Foundation's State Business Tax Climate Index, which measures the impact on business of five major elements of the tax system: the percentage of income taken by all taxes, the individual income tax rates, the corporate income taxes, the sales tax rate, and the complexity of the tax system. Neighboring states ranked as follows: Idaho (31st), Oregon (10th) and California (38th).Washington’s State/Local Tax Burden above the National Average
Washington State spent most of the nineties with a significantly above average tax burden, which peaked in 1994 through 1995 at 11.7%. In subsequent years however, the state saw this figure fall as individual incomes rose more rapidly than state/local tax collections. Estimated now at 9.9% of income, Washington’s state/local tax burden percentage is 21st highest nationally and just below the national average of 10.0%. .
Washington Levies No Individual Income Taxes
Washington levies no state personal income taxes, joining Alaska, Florida, Nevada, South Dakota, Texas and Wyoming as the only other states to do so.
Washington Levies No Corporate Income Taxes
Washington’s corporate tax structure consists of no corporate income tax. However, the state does impose a gross receipts tax composed of 20 separate rates ranging from 0.011% to 5.029% depending on the type of business activity. Washington joins Nevada, South Dakota, Texas and Wyoming as the only other states who do not levy corporate income taxes.