Learn How to Form an Washington Professional Corporation

Is a Washington professional corporation the right structure for you?

All businesses should consider a formal entity structure, but there are some that would do better as a corporation than other types. See the ZenBusiness entity guide to see what’s right for you.

PC or PLLC?

There are two types of professional entities to choose from in Washington state. A professional limited liability company (PLLC) is easier to form and provides some tax benefits. However, if the services you provide require a higher level of liability protection, a professional corporation (PC) might be the best choice.

Dividing ownership

In a PC, owners are referred to as shareholders because they own stock in the company. When forming your business, you will decide on the total number of shares and your percentage of ownership, which is often based on your initial investment. As the company grows and members come and go, you can redistribute these shares and change the ownership composition.

Corporate management

There are three main roles to fill in your Washington professional corporation, and some team members can be assigned more than one.

• Director: A member of the management team in charge of organization and operations
• Shareholder: The owner(s) who control stock in the company
• Incorporator: The individual(s) who files Articles of Incorporation, officially creating the PC upon acceptance

Choose a name for your corporation

Washington name restrictions

Choosing the perfect name for your new business can be exciting and stressful. We recommend choosing something easy to read, memorable, and relevant to your company’s mission. In Washington state, your name must include the words “Professional Service” or “Professional Corporation.” Consider an approved abbreviation, such as “P.S.,” for sleeker signage.

Name availability

Conduct a quick search on the Washington Secretary of State’s business name database before settling on a name idea because your business name is required to be unique in the state of Washington. It’s best to select a name with an available web domain to help your online presence remain consistent and easy for clients to identify.

Advance reservation

What should you do if you’ve decided on the perfect name but can’t file immediately? Take advantage of ZenBusiness’s name reservation service to secure your choice in advance and prevent it from being scooped by competitors for 180 days.

Find a Washington registered agent

Selecting and maintaining a registered agent is mandatory as long as your professional corporation is active. In Washington, an agent must:

• Be a business entity or individual with an in-state physical address (not a P.O. box)
• Accept responsibility for handling legal notices and documents on an ongoing basis

It’s fine for a shareholder to serve as the corporation’s agent. However, this requires them to be available continuously during business hours. ZenBusiness’s registered agent service connects you with a Washington professional who manages everything on your behalf. Outsourcing ensures ongoing compliance and helps keep things from getting lost in the shuffle.

File Articles of Incorporation

To become a legally recognized professional corporation, your chosen incorporator must fill out and sign the Articles of Incorporation. This document informs the state of your PC’s name, address, directors, number of shares, and company mission. You must also submit a consent form signed by your registered agent. In Washington, you can file online for $200 or by mail for $180, payable by check or money order. Unlike many other states, Washington requires the incorporator to be licensed to provide the same professional services as other members of your team.

Establish a corporate record

Washington law instructs corporations to keep an official record of important legal documents and transactions. Many businesses choose to use a secure binder or file cabinet in addition to a cloud-based storage system. Countless files will pass through your hands before you know it, so the sooner you start organizing, the better. Corporate records are also required for business compliance.

Designate a board of directors

The initial board of directors has an extremely important role to play in your new business. The board holds meetings regularly, provides insight and oversight as the company scales, and manages organizational tasks. The board must be composed of state-licensed professionals in the same field and may include the incorporator.

Draft corporate bylaws

Once you have named your initial directors, it’s time to draft bylaws. External legal counsel may be helpful, but it isn’t required. The rules and regulations you agree on will provide a strong foundation for the success and longevity of your business. Consider voting procedures, share distribution, conflict resolution, and officer appointments. Be as specific as possible but know that you can always revisit these later.

Hold your first board meeting

Your first official board meeting will be long; ask a team member to record the entire session so you can revisit the meeting minutes and include them in the corporate record. You should use this time to:

• Appoint officers (president, secretary, and treasurer)
• Ratify bylaws
• Discuss tax status
• Outline the shareholder agreement
• Issue stock shares

Understand Washington tax obligations

Before you familiarize yourself with the particulars of Washington corporate tax law, register for an Employer Identification Number (EIN) from the IRS. This legally required unique business identification number is needed to file taxes, open a bank account, and hire employees. ZenBusiness has a streamlined tool to make this process easier.

Federal

In the U.S., every PC must pay federal taxes as a C corporation (standard) or S corporation (requires a special application). C corporation shareholders are taxed twice, once on the corporate level and again on the personal level. S corporation status alleviates some of the tax burden, but you must submit a formal application proving you have fewer than 100 shareholders, no foreign shareholders, and only one class of stock.

State

The good news is that Washington doesn’t have a state income tax. However, you’re required to pay a business and occupation (B&O) tax that will be calculated based on your gross receipts and business classification.

Local

Several major cities in Washington impose a local version of the B&O tax. To read more about city, sales, and industry taxes relevant to your corporation, visit your municipal government website, or consult a tax professional.

Obtain Washington licenses and permits

Often, license and permit requirements are dictated by your location and business functions. Understanding exactly what you need can be daunting because there’s no central location to gather information. ZenBusiness’s license report tool eliminates the need for tireless research by doing the hard work for you.

General

Regardless of your services or location, you’ll need to register with the Washington Department of Revenue to get a general business license. This should be done after filing your Articles of Incorporation.

Industry-Specific

Your business may need to apply with Washington’s Department of Licensing to obtain industry-specific permits. For example, health care facilities, accounting firms, and construction agencies must hold a valid Washington license before accepting clients.

Acquire insurance for your Washington PC

General liability

Commercial liability insurance is the first line of defense for any corporation. It protects you from losses due to property damage or injuries that occur on the premises.

Malpractice insurance

This optional coverage is important for licensed practitioners, especially health care providers, who need protection in case a client claims they were harmed due to a professional error.

Workers’ compensation

The Department of Labor and Industries requires any corporation that hires employees to secure workers’ compensation insurance through the state fund. Alternatively, you may be able to qualify as a self-insurer.

Open a business bank account

Using your corporate EIN, open a new bank account for your corporation. It’s likely that the bank will ask for a copy of your Articles of Incorporation, bylaws, and signatories for verification, so be sure to bring these along.

Ready to kickstart your business?

Forming a Washington PC by yourself isn’t impossible, but it helps to have support. At ZenBusiness, we’re dedicated to providing you with helpful tools and an expert team to run and grow your business. Follow our guide, contact us with any questions, and allow us to share in your success as you launch an amazing business!