Setting Up a Business Partnership in Washington State

Decide between a general partnership, limited partnership (LP), or limited liability partnership (LLP). This decision affects personal liability, tax treatment, and management structure. General partnerships offer simplicity but unlimited liability for all partners. LPs protect limited partners from liability beyond their investment but require at least one general partner with unlimited liability. LLPs (available to certain professions in Washington) offer liability protection for all partners.

Choose a unique name for your partnership that complies with Washington state naming requirements. Conduct a name search through the Washington Secretary of State's website to ensure availability. If using a name other than the partners' surnames, you'll need to file a fictitious business name statement (also called a 'doing business as' or DBA).

Create a comprehensive partnership agreement that outlines ownership percentages, profit and loss allocations, management responsibilities, decision-making processes, dispute resolution procedures, and exit strategies. While not legally required in Washington, a written agreement is strongly recommended to prevent misunderstandings and conflicts between partners.

For limited partnerships or LLPs in Washington, file a Certificate of Limited Partnership or Statement of Qualification with the Washington Secretary of State. General partnerships are not required to file formation documents but may choose to file a Statement of Partnership Authority. Filing fees apply and vary by partnership type.

Apply for an EIN from the Internal Revenue Service (IRS), even if you don't have employees. This federal tax ID is required for partnerships to open business bank accounts, file tax returns, and handle other tax-related matters. Apply online through the IRS website for immediate processing.

If operating under a name different from the legal names of all partners, file a fictitious business name statement (DBA) with the county clerk's office in the Washington county where your business is located. Publication requirements may apply depending on the county.

Register your partnership with the Washington State Department of Revenue and obtain a Business License Application through the Washington Business Licensing Service. Washington requires most businesses to have a state business license ($90 fee). Additional licenses or permits may be required depending on your business activities and location.

Washington has no personal or business income tax, but businesses must register for other applicable taxes such as Business & Occupation (B&O) tax, sales tax, and use tax. Register through the Department of Revenue when obtaining your business license.

If your partnership will sell taxable goods or services in Washington, apply for a sales tax permit (also called a reseller permit) through the Department of Revenue. This allows you to collect sales tax from customers and remit it to the state.

Open a separate bank account for your partnership using your EIN and partnership documentation. This separation of business and personal finances is crucial for proper accounting, tax purposes, and maintaining the distinction between personal and business assets.

Document all initial capital contributions from partners, including cash, property, services, or other assets. Specify the value assigned to non-cash contributions and how these affect ownership percentages. This agreement should be signed by all partners and kept with your partnership records.

Create a buy-sell agreement that outlines what happens if a partner wants to exit the business, becomes disabled, or dies. This document should address valuation methods, payment terms, and funding mechanisms (such as life insurance). This is essential for business continuity and preventing unwanted third parties from becoming partners.

Document day-to-day operational procedures, including accounting methods, record-keeping requirements, meeting schedules, and reporting responsibilities. These procedures should align with your partnership agreement and Washington state requirements for business record maintenance.

Secure appropriate business insurance, which may include general liability, professional liability, property insurance, and workers' compensation (if you have employees). Washington requires workers' compensation coverage for all employees through the Department of Labor & Industries industrial insurance program.

Check with your city and county governments for any local business licenses, permits, or registrations required. Many Washington municipalities have their own business licensing requirements in addition to state requirements.

If hiring employees, register with the Washington Employment Security Department for unemployment insurance and the Department of Labor & Industries for workers' compensation. Familiarize yourself with Washington's employment laws, including minimum wage requirements ($15.74/hour as of 2023), paid sick leave, and paid family and medical leave program.

Create a calendar of tax filing deadlines for federal and Washington state requirements. Partnerships must file annual federal information returns (Form 1065) and issue Schedule K-1 forms to partners. In Washington, B&O tax returns are typically filed quarterly or monthly depending on tax liability, and sales tax returns follow a similar schedule.

Schedule annual compliance tasks including business license renewals, annual report filings (required for LPs and LLPs in Washington), and any industry-specific permit renewals. Set up reminders for these recurring obligations to maintain good standing with state authorities.