Many self-employed Washington residents are eager to start their businesses. The simplest and most rational solution to this issue is to join the ranks of sole proprietors.
Organizing and managing a business in this format is the least difficult in America and has no service pitfalls. Although, future business owners will have to adhere to certain norms. Also, be prepared that you will have to face some restrictions regarding the functions of your sole proprietorship.
So, the main task of this manual is to help you answer the essential question – is the business format of an individual enterprise right for you? And, of course, we will tell you which aspects to pay attention to while opening a sole proprietorship and how to set up a business structure in this vein properly.
The Proper Way To Start Business As The Washington Sole Proprietor
There is no algorithm for organizing the business work of an individual entrepreneur in Washington as for LLC. In addition, the state does not charge additional service fees for the formation or management of this type of business or company. Are you looking to become an individual business owner and start a sole proprietorship in Washington? – Just start working!
Though, you still have to go through several additional legal formalities. These service stages are optional. Although many sole proprietors prefer not to neglect them, compliance with these formalities guarantees the legal protection of their interests.
Applying For DBAs
Almost every company and business owner prefers doing business as a DBA. There are many benefits to running a business under an assumed name compared with an entity or LLC. We are talking primarily about creating the business image of your company. Potential clients and consumers will find this approach more professional and give you more confidence. It turns out that a company that uses the real name of its owner is often not competitive.
Let’s clarify that a company owned by sole proprietors can use the DBA to open and manage a business bank account. Customers will appreciate it as one more advantage in favor of the business owner, so they feel more comfortable.
You should first register an administrator to take an assumed name or “Trade Name” for your company. You choose a trading name, check its availability and then register it with the Secretary of the Washington State. Where can you find out if the name you have chosen is available? Use a convenient online service for this.
Go online and select Washington’s Business Lookup and the U.S. Patent and Trademark Commission in the search bar. Here you will quickly learn everything about the assumed name and whether it is available. If it is, you should register that. To do this, fill out the following application for a business license. You can send it online or by mail.
Clarification & Compliance with Tax Requirements
You can run your business in this format and not hire third-party employees. In this case, you do not need to obtain an EIN (Federal Tax Identification Number) because your Social Security number will replace it. Of course, it would be correct to take care of your confidentiality and still use the EIN and not the SSN.
The nature and the structure of the business activity of individual entrepreneurship determine the list of tax requirements that the state will put forward (as with LLC).
Washington State entrepreneurs do not pay the standard income tax. Nevertheless, they have to pay some other fees. As a rule, in such enterprises, the owner pays taxes from his income. Also, some taxes are associated with a particular field of business. They are industry-specific taxes.
For example, you can sell food or alcohol and in each of these cases, the taxes will be different. There are also several general taxes – a tax on business and profession, a tax on retail sales, and the use tax. You will find out the details of that if you go to the official website Washington Department of Revenue. Here you can also apply for registration of your company.
Business Licenses & Permits
If you conduct business in Washington, in this case, you do not have to get a license that is common to all companies. However, you will need to issue some other licenses and/or permits, depending on the specifics of your business.
Any entrepreneur in Washington should be aware of the current licensing rules that affect that business field. These days, you can get all the up-to-date information on licensing if you submit a simplified application for a license in Washington. To do this, fill out an application and choose other permits related to your company, if necessary.
You will find explanations about all this if you open the Business License Application FAQ Page of the Washington State web resource. Here all the information is presented clearly. Also, do not forget to check if your company may need local-level licenses.
You will need to contact your local clerk in the city or district of Washington to clarify all the details of registering your business. Every place may have its unique licensing requirements, for example, as in the cities of Seattle, Spokane and Tacoma.
Washington Sole Proprietor: The Notion & Essence
A sole proprietor is not a legal entity! But any corporation and limited liability company (LLC) has this status. As a sole proprietor, you run the business alone (register and manage it on your behalf). It is worth noting that this gives the business owner advantages, though, imposes additional obligations and responsibilities on him.
Make Sure to Pay Attention to the Following Three Aspects
There are obligations to pay taxes to the state
A business owner and an individual entrepreneur are the same people. It means that filing tax returns is not a requirement, as with an entity or LLC. You need to declare your income and expenses and fill out the declaration of an individual;
Business owners who are registered as sole proprietors have the right to enter into contracts on their behalf, unlike an entity. Also, receiving profit from clients, in checks they can indicate their name in the recipient column;
Flexible terms of business management
The advantage difference between individual entrepreneurship and any entity is the ability to combine work and personal assets. Whereas corporations and LLCs must separate personal assets from company assets. It has several positive and negative aspects. For example, if you have financial difficulties, creditors can seize or confiscate your personal property (house, car, etc.). In the case of corporations and LLCs (or any entity), creditors do not have this freedom, as their powers only apply to business assets.
Of course, the structure of doing legal business as a sole proprietor is greatly simplified while in Washington. You don’t even have to pay any commission fees provided for the entity or LLC. At the same time, based on the nature and structure of the business activity that you conduct, you will all have to go through a series of entity stages.
The issues of taxation, obtaining licenses, and permits require more detailed consideration. Also, pay attention to the possibility of obtaining and using DBA. These aspects are vital, as their omission can result in unnecessary legal penalties for you.
We have prepared this manual so that you can think over the structure of your business to the smallest detail. Manage it correctly and get more legal profit!