After you file your certificate of formation with the Washington Secretary of State, your LLC begins its legal life.
But before you can kick back, cocktail in hand, there are a few other things you need to do in order to make your LLC fully operational.
We’ve compiled a list of all the steps that you need to take after you form your LLC. Some of them are legally required while others aren’t mandatory but highly recommended.
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 Agreement
First up, drafting and signing an LLC operating agreement.
What’s an operating agreement?
It’s basically a legal document that establishes how your LLC will be run.
It will include things like:
- How decisions are made
- How money is distributed
- How disputes are resolved
An operating agreement has lots of details, so take your time as you draft yours, and really think about what you’re putting into your operating agreement.
All of the members of your LLC 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 signs and follows it.
Do you really need an operating agreement?
An operating agreement isn’t mandatory, but it’s still a great idea to have one in place (yes, even if your LLC only has one member and you’re in charge of making all of the decisions).
Why? Well, having a written operating agreement gives 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.
This is really important for single member LLCs (SMLLCs) because, without the formality of an agreement, an SMLLC can look like a sole proprietorship, which doesn’t provide limited liability.
Plus, lenders might ask to see an operating agreement before they agree to issue a loan in your LLC’s name. If you’re planning on taking out loans to build your business, this simple document will improve your chances of getting financing.
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 can get your EIN from the IRS. This nine-digit number is used by the IRS to identify your LLC, which means you’ll 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 an operating agreement.
Plus, using your EIN rather than your Social Security number helps prevent identity theft, which is frighteningly common today.
And, on top of all of that, many banks will actually require an EIN when you open a business bank account in your LLC’s name.
While it might sound intimidating, getting an EIN is super easy and free. You can complete an online application at the IRS website.
Step 3: Get a Business License
Virtually every business in Washington must get a general business license from the State of Washington.
You’ll also likely need to get a local (city or county) business license.
Like an operating agreement and EIN, getting all required business licenses helps prove that your LLC is legitimate. It also helps preserve your limited liability.
More importantly, if the State of Washington or your local government finds out that you didn’t get a required license to run your company, it will impose penalties and fines. These fines cost a lot more than it would’ve cost you to just get the license in the first place.
Operational licenses might be necessary, too
In addition to a general 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 depends on the work that you do. For example, real estate brokers and salespeople must be licensed by the state.
Getting your required licenses is easy
Don’t worry, obtaining business licenses in Washington state is usually simple and straightforward.
The State of Washington has an online Business Licensing Wizard which helps you figure out which licenses you need and where to get them. Once you know what you need, you just fill out an application and pay a fee.
Step 4: File the Statement of Information
Within 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?
It’s used to keep your LLC’s contact information up-to-date in the Secretary of State’s records.
What does the Annual Report need to include?
All you have to provide is your LLC’s address, your registered agent’s name and address, and your members’ names and addresses.
Step 5: Open a Business Bank Account
We highly recommended that you open a bank account in your LLC’s name, rather than using 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 and LLC’s funds in a single account doesn’t win you any points when it comes to proving that your LLC is a separate entity.
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.
Step 6 (Optional): File a Trade Name Registration
Did 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 a new application. Registration can be done online or by mail. There is a $5 fee per name.
Maintaining Your LLC Doesn’t Have to Be Complicated
Wow, 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 Collective is here for you to help you through all of the important steps. From opening a business bank account to getting an EIN for your shiny new LLC, Collective’s here to take care of all the boring stuff, so you don’t have to.
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.