Washington LLC Operating Agreement

Due to the limitation of liability and tax advantages typical of partnerships, limited liability companies have become popular since their introduction 30 years ago.

When deciding if this LLC operating agreement template is suitable for a future endeavor, a business person can rely on such advantages as the company’s limitation of liability for the indebtedness and obligations, moderate costs of forming and running the business, and flexible opportunities for structuring and managing the business.

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Washington LLC Laws and Definition

Formation, operation, and liquidation of limited liability companies are regulated by the Limited Liability Company Act, which was first adopted in 1994 and considerably revised in 2016.

The revised law doesn’t bind LLCs to prepare their operating agreements in writing, but the agreements should:

  • Expressly define obligations of the company managers
  • Set clear limits and exceptions of these obligations
  • Abolish the requirement to indicate whether an LLC is a member- or manager-managed in the certificate of formation
  • Introduce “one member, one vote” as the default voting pattern
  • Set more sophisticated and expanded obligations regulating access of LLC members to company records and information
  • Permit classes of members that have no voting rights
  • Allow the LLC formation by not-for-profit and company management by the board

Popular Local Operating Agreement Forms

An LLC operating agreement establishes principles for an LLC just like articles of incorporation regulate the operation of a corporation. Below are some of the most popular local operating agreements searched by our users.

Steps to Forming an LLC in Washington

As anywhere across the USA, the formation of a limited liability company in Washington involves multiple steps.

1. Name your LLC

Selecting a company name is a more sophisticated process than it seems at a casual glance. The name must be available and distinguishable from those already in use. According to Washington law, the limited liability company’s name must include a reference to its legal form, whether in full word combination or as an abbreviation. The name must also exclude several words misleadingly indicating that a firm is engaged in any banking, corporate, construction, and some other activities.

2. Designate a Registered Agent

A business owner should select a Registered Agent to function as the LLC’s primary point of contact with the state and accept service of process. It is not a must to hire registered agents in Washington; you can act as a registered agent or appoint your trusted friend. The advantage of this approach is that it is, of course, cheaper than hiring a professional.

Still, the registered agent service also boasts a range of strong features:

  • Privacy. Relief from the necessity to share your personal or office address in the public domain.
  • Convenience. You can maintain a flexible schedule, as your Registered Agent must be available during standard business hours.
  • Confidence., The agent delivers you the required documents in the absence of your employees and customers, leading to peace of mind.
  • Publicity. Another advantage is the national coverage for those who intend to grow their business beyond the state.

3. Choose the Type of LLC

The next step is to select either a domestic or foreign type of LLC. A domestic LLC is a company newly incorporated in this same state. On the other hand, a foreign LLC is a company that was established somewhere else and is now expanding operations in this state.

4. Prepare and Fill in the Certificate of Formation

The fee for submitting the certificate of formation to the Secretary of State is $180. You can submit it via the fill-in-the-blank form published on the website of the Secretary of State. Users wishing to file it online should go to the Online Application Forms page. In this case, the online filing fee is $20, and the expedited processing fee is $50.

By default, the management scheme adopted in Washington for LLC is managed by all its members. If business owners intend to employ managers for this purpose, they must check “Yes” in the respective box.

5. Complete the Washington Operating Agreement

Washington is among the US states where business owners are not obliged to have an operating agreement when forming an LLC or file it to the Secretary of State. Still, it’s very reasonable to draft the agreement for the following reasons:

  1. The possibility to override state default rules. If you prefer not to develop an operating agreement in Washington, your LLC will be regulated by the Washington Limited Liability Companies Act RCW 25. 15. However, if you prefer to make up such a contract, you can select the rules instead of following the default ones.
  2. Voting Rights. Dwelling on the members’ voting rights in detail in this type of contract allows resolving conflicts and disagreements that occasionally arise between company members. For example, the agreement can contain a clause regulating the voting rights depending on the members’ ownership interest in the company, unanimous consensus, or the majority vote.
  3. Admission of New Members. By default, unanimous consent of all existing members of Washington LLCs is necessary to admit new members. In the operating agreement, company owners can introduce other guidelines they deem fit, including a provision that the manager makes the decision or the decision is based on a majority vote.
  4. Management. It is imperative to describe the roles, duties, and responsibilities of the manager in the operating agreement if LLC is not member-managed. Other aspects to be disclosed here are the manager’s effect on the members’ voting rights, and the manager’s resignation or removal procedure.
  5. Governing Law and Dispute Resolution. This section of the agreement explains the dispute settlement procedure, where and how conflicts are settled, and whether they are resolved through arbitration and the venue and jurisdiction in case of disputes between company members and the company and third parties.
  6. Withdrawal. When an LLC is created, one can easily overlook such situations as the member’s death, disability, or quitting the business. All of this can be included in the operating agreement. The specific clause can include whether members can sell their part of the firm, whether a firm enjoys the first refusal in this case, and the buyout procedure.

The agreement’s content is not strictly regulated. Still, it usually reveals such information as details of the parties and the company itself, meeting procedures, company management principles, initial capital contributions, and profit/loss distribution. The Formation section describes, among other things, the purpose and term of the company operation. Other titled sections may cover:

  • Assignment of Interests (stating that is it is allowed to transfer or assign rights and obligations of the members)
  • Ownership of Company Property
  • Right of First Refusal (stating whether a company has any preferential right in case a member decides to sell their part of the company)
  • Withdrawal (specifying details on how a member can leave the company)
  • Dissolution and Liquidation

Of course, the agreement must bear the signatures of all parties.

In Washington, you don’t have to file an operating agreement with the state. It’s enough to provide its counterparts to all agreement parties.

6. Apply for the Business License

Every limited liability company is obliged to file the Business License Application, a legal instrument for registering businesses. This form can be printed and mailed, submitted online, or applied by personally visiting a business licensing office. The procedure costs $20.

Once this procedure is complete, a company gets the state business license and the Unified Business Identifier (UBI) number. A business owner needs the Business License Application to register a trading name and open a state employment account, a prerequisite for employing staff.

7. File an Initial Annual Report with the Secretary of State

According to the reporting requirements in Washington, businesses must submit an Initial Annual Report (by mail or online) within 120 days after submitting the certificate of formation. The fee is $10.

8. Comply with Tax and Other Regulatory Obligations of LLC

Any limited liability company must contact the IRS to obtain the Employer Identification Number (EIN) and open a state employment account if the company plans to employ personnel. Details on submitting HR reporting, including verifying work eligibility and withholding allowances, are disclosed on the IRS website’s Hiring Employees section.

Washington companies must complete the state excise tax return, usually once a month or quarterly, and pay the business and occupation tax at a rate of 0.1–2.0% of gross revenue. The tax is due only if the company’s gross revenue doesn’t exceed $7,000 per quarter. But even if the company has no income at all, it still has to submit its tax return.

Published: May 9, 2022