Whether you’re launching a homemade jewelry business or offering personal training sessions from your garage, when you begin operating a business in Washington, you automatically become a sole proprietor. However, to truly set yourself up for success, you need to know how to open sole proprietorship in Washington the right way. In this post, we’ll walk you through the essential steps to establish and open your sole proprietorship in Washington.
Understanding the Sole Proprietorship
A sole proprietorship is the simplest form of business structure. When you start selling goods or services without filing formal creation documents, you’re automatically a sole proprietor. This business model is attractive because it’s low maintenance—there’s no need for renewal filings or separate tax returns, as your business income is reported on your personal tax return. However, one important drawback is that you’re personally liable for any business debts or legal obligations, which means personal assets could be at risk if challenges arise.
Four Key Steps to Open Your Sole Proprietorship in Washington
Even though Washington law doesn’t require you to file creation documents to open sole proprietorship in Washington, following these four steps can ensure you’re properly organized and ready to grow your business.
1. Choose Your Business Name
Your business name sets the tone for your brand. In Washington, you have the option of using your legal name or creating a trade name (also known as a “DBA” or “doing business as”). If you opt for a trade name, it must be unique—not only should it differ from your personal name, but it must also be distinguishable from any other registered business in the state. This careful selection helps avoid potential trademark conflicts and consumer confusion. To verify availability, use tools like the Washington Secretary of State’s business search and the USPTO’s Trademark Electronic Search System.
2. Register Your Trade Name
If you decide to operate under a name different from your own, you’ll need to file your trade name with the Washington Department of Revenue (DOR). This process can be completed online using the DOR’s Business Licensing Wizard or by mail using Form 700 028. As of the latest update, the filing fees include a $5 trade name registration fee plus a $10 processing fee. Registering your trade name not only secures your brand but also forms part of your general business license application with the state.
3. Obtain the Necessary Licenses, Permits, and Zoning Clearance
Depending on your business activities, you may need additional licenses or permits. Beyond your trade name registration, many types of businesses require specific professional or operational licenses. The Washington Department of Licensing offers online services for managing these permits, making it easier to apply for and renew licenses. Additionally, check with your local city or county offices—such as city halls or county clerks—for any extra requirements related to zoning or building permits, as these regulations vary across regions.
4. Secure an Employer Identification Number (EIN)
While sole proprietors without employees can report taxes using their Social Security number, obtaining an EIN from the IRS is highly recommended. An EIN is a nine-digit number used for tax reporting and may be required by banks when opening a business account. Having an EIN can also help protect your identity and simplify tax filings, especially if you plan on expanding and hiring employees in the future.
Next Steps for a Successful Sole Proprietorship
Once you’ve opened your sole proprietorship in Washington, consider these additional tips to help your business thrive:
- Open a Dedicated Business Bank Account: Separating your personal and business finances can simplify tax preparation and help you track your income and expenses more efficiently.
- Consider Liability Insurance: Since you’re personally responsible for business debts, investing in general liability insurance can provide valuable protection against unforeseen challenges.
- Stay on Top of Tax Reporting: Familiarize yourself with both state and federal tax obligations, including sales tax, use tax, and any specific employer-related taxes if you hire staff. The Washington Department of Revenue provides extensive resources to help you stay compliant.
Final Thoughts
Knowing how to open sole proprietorship in Washington is crucial for any aspiring entrepreneur. Although the state doesn’t require formal documents to start a sole proprietorship, taking the extra steps to register your trade name, secure an EIN, and obtain necessary permits can set a solid foundation for long-term success. By following these steps, you can focus on growing your business with confidence.