If you’re some sort of professional working in Washington, it makes a lot of sense if you partner with other similar professionals to form a business. Better yet, you should opt to form a professional corporation rather than a general partnership. There are several advantages to a professional corporation, including having limited liability protection, tax deductions that other types of businesses don’t enjoy, and many other benefits.

Are You a Professional?

While we all like to think that when we do a job for money, that automatically makes us a pro. But there’s a difference when it comes to being a licensed professional. You have to prove your expertise to the State of Washington. If you’re a licensed professional, then you may be able to form a professional corporation in Washington with other licensed professionals in your industry.

So, how do you go about it? There are steps you need to take, to make sure you do it right.

Step 1: Come Up with a Good Name

It’s best that you come up with something catchy, so people will remember it (but in a good way). It’s also recommended that the name of your professional corporation indicates exactly what kind of services you’re offering. That way, your business name is more likely to come up in Google results when potential customers look for the kind of services you’re offering.

You also can’t use a term that falsely indicates what kind of services you’re using. If you’re not forming a law office, then you can’t use the term law office as part of your name.

Your name may even tell people what your priorities are regarding the quality of your services. Remember that you will be associated with the business name for a while (and maybe even for a long while), so you ought to be proud of saying that business name.

You do need to make sure the name you’ve chosen isn’t already taken. To check, you can consult the Secretary of the State of Washington Corporations/LLCs database. Try to avoid having a name that’s too similar to other names that are already in use, to avoid confusion.

When you’ve chosen a name, it will have to include either the phrase professional service corporation or just the initials PSC. You can’t use other terms that may falsely indicate that it’s another type of business, like LLC or limited liability corporation.

Finally, register your company URL, so you end up with your companyname.com website. Even if you don’t have plans of using the site for the moment, you still don’t want other people using that URL.

Step 2: Assign Your Register Agent

Washington, like just about all the states in the country, requires that you have a registered agent working for you. You won’t be able to form your corporation without one, and if you stop using a registered agent while running your company then you may end with the dissolution of your corporation as a result. Having a registered agent is not just a requirement, but simply common sense.

The job of the registered agent is to receive official documents on your behalf. These documents can be tax forms, requests for reports from the Washington Secretary of State, or even a summons because someone is suing your corporation. The registered agent must then notify you about these documents and forward you the copies of these documents.

You can, in theory, assign anyone you trust to be your registered agent. You can even be the registered agent. The requirements only specify that the registered agent must be an 18-year-old resident of Washington, with a physical address (instead of just a P.O. Box) within the state. They then must be physically present in that location during business hours to officially receive the official documents on behalf of your corporation.

Instead of assigning yourself and using your home or office as your registered agent location, you should simply opt for a professional registered agent service. That way, you won’t have your home address publicly listed, and you won’t have to stay at that location during business hours.

The registered agent service can do the job for you, with their own address and staff manning that location. They will always have people to receive the documents, and then they can scan the documents and place them in the online document storage you can access. They will also notify you when they receive the documents.

With these experts to help you, you’d be free to move about and grow your corporation unimpeded. You can also keep your home address private. Whenever you receive any official documents, you do so discreetly, as it can be embarrassing to receive a summons in the presence of clients.

Besides, the yearly fees for registered agent services are extremely reasonable, and you rarely will have to pay more than $200 per year. Some incorporation services even offer registered agent services for free for the first year.

Step 3: Complete Your Articles of Incorporation

This is like the birth certificate for your professional corporation. You must submit the Articles of Incorporation to the State of Washington online using the Corporation and Charities filing system of the State of Washington. You can have all your partners and shareholders involved as incorporators. There must be at least one incorporator, who will sign the document.

There will be a $200 filing fee and you’ll need to wait about 2 working days for the form to be processed by the Secretary of the State of Washington.

Step 4: Maintain Your Corporate Record

Washington requires all professional corporations to document all the important corporate decisions made by the officers of the corporation. You have to maintain a permanent record of all these decisions.

Your own place of business can be used to store the original paper documents, or you can hold them in a secure location. But you should also make sure to scan all documents (or have your online/professional incorporation service do it for you) and have them stored in a secure online storage website.

Step 5: Set Up Your Corporate Board of Directors

The incorporators, as the shareholders, will also need to pick the directors for the professional corporation. The incorporator (or incorporators) has to record the initial director selections in a signed document (the incorporator’s statement) and then file that document along with the other official corporate records. The incorporators can also serve as the directors.

These initial directors will then have to make decisions for the professional corporation, starting with the creation of the bylaws. They will serve until new directors are elected in the next shareholder meeting, as stated in the bylaws. All the directors must share the same profession, as this is a professional corporation.

Step 6: Creating the Corporate Bylaws

The set of corporate bylaws is like the Constitution or the operating manual for the professional corporation. All Washington corporations are required to create these bylaws, though the bylaws don’t have to be filed with the state of Washington.

Even if they’re not legally required, you’ll need them so that everyone has an agreed set of rules to work with. Even your bank may not give you a loan or let you open a business bank account without showing your bylaws first.

Basically, the bylaws set on paper the specific procedures and rules by which the professional corporation will operate and make decisions.

Typically, the bylaws will cover the following topics:

• How your shareholders will conduct votes
• The total number of directors for the corporation
• How directors are elected
• How frequently the board of directors will hold meetings
• The roles for various types of officers, like the CEO and the chief financial officer
• Procedures for settling disagreements between shareholders and directors

Your best bet, if you can afford it, is to hire an experienced Washington corporate lawyer to help you draft the ideal bylaws for your professional corporation. But you can always do it yourselves, and it’s easy enough to find free bylaws templates online.

Step 7: Conduct Your First Board Meeting

Once the directors have all been chosen, the next job of the incorporator is to plan for the first meeting of the entire board of directors. After all, some of the chosen directors may not have been present when they were picked as one of the directors.

During this first meeting, the directors will then review the set of bylaws. Once everything’s been discussed about the bylaws, the board can then approve the bylaws.

After that, they still have several key decisions to make. These include:

• Picking the bank in which to open the business bank account
• Designating the officers in charge of the everyday corporate affairs
• Approving the issuing of stock certificates for shareholders
• Determine more details regarding the type of professional corporation they want to run

Someone must be designated as the secretary to record the minutes of the meeting. That’s to say, all the decisions made by the board of directors must officially be recorded. The directors should be given brief minutes, and then this record should be filed among the official corporate records.

Step 8: Set Up the Tax System

If you’re operating a Washington professional corporation, you’ll need your EIN, otherwise known as the federal tax ID number. It’s easy enough to get, as you can get it for free from the IRS website. It’s also a service that’s offered by many incorporation services. You’ll need that EIN not just to file your corporate taxes, but also to be able to open your business bank accounts and hire employees.

As we’ve mentioned earlier in this article, the directors have to decide the type of professional corporation they want to have. Will it be an S-corporation or a C-Corporation? The choice will have a crucial effect on the taxes you pay.

If you want just a “regular” professional corporation, then you mean you want a C-corporation. It’s a very popular choice, but it does come with the burden of what’s usually called double taxation.

The first taxation happens when your corporation earns profits. You pay a certain percentage of that as your corporate tax.

Usually, that means you can now divide the profits between the shareholders of the company. But if you’re a shareholder, you’ll then have to declare the income in your personal tax returns. It will be taxed again, even though it’s already been taxed at the corporate level.

You avoid this issue if your company is an S-corporation. With S-corporation dividends, there are no taxes. But your company has to meet certain requirements, including the following:

• The professional corporation has fewer than 100 shareholders.
• None of the shareholders are foreign.
• It only issues 1 class of stock.
• It’s not owned by another business organization.

State Taxes

There may be state taxes you have to pay, depending on the tax setup of your professional corporation. You should do research on the website of the Washington Department of Revenue, or contact them if you have questions.

You can then use the online taxes portal to manage your tax account, and even pay and file your taxes online.

Local Taxes

Even your county or city may impose taxes as well—that’s politics for you. To know more about this matter, you should contact the revenue department in your area.

Step 9: Obtain Your Business Licenses and Permits

If you haven’t yet obtained your professional license required for the job you do, then you need to get it. The State of Washington has a database of that lists the professional licenses in the State. You can also take a look at the Business Wizard on the website of the Department of Revenue of the State of Washington as well as the Licensing Department’s list of professional licenses.

But your county or city government may also require other permits and licenses for certain jobs. So, you should consult your local government to see if you’ll need extra licenses for your profession.

Step 10: Get Insurance

If your professional corporation has employees, you must get workers’ compensation insurance. To know more about this, you should consult the State of Washington Labor and Insurance website. You’ll likely need some sort of general liability insurance, and maybe some other types of insurance specific to your industry.

Step 11: Open Your Business Bank Account

At the first board of directors meeting, you’d already know which bank you’ll open your account in. You’ll need this business bank account so that you can separate your personal assets from your corporate assets. The corporation will get its spending money from this account, and not from someone’s bank account.

Final Words: Getting Some Help

As you may have realized early on, forming your professional corporation can be somewhat complicated. But your fellow professionals don’t have to figure out and do certain things all by yourselves. Here are some people or organizations that can help:

1. An Experienced Washington Business Lawyer

There are plenty of laws and regulations that you’ll have to account for, and they can be a legal minefield full of booby traps. Your best bet is to have a lawyer guide you through all the way, to help make sure you’re complying with all pertinent laws and regulations. What you want to avoid is going through an oops moment that can prove costly for your business.

If you don’t personally know any lawyers in Washington with extensive business law experience, you can try the AVVO database. This database has Washington lawyers listed by city location, and there are even reviews for their legal services.

2. Washington Small Business Development Centers

The Washington SBDC has locations across the state, and you should also check out its website. They can provide business advice, and even help with your market plan, financial analysis, and other business plans.

3. Seattle District Office of the U.S. Small Business Administration

This is a website full of Washington business news, info, and other business resources you might need. The SBA has lots of stuff that can help.

4. Online/Professional Incorporation Services

These services don’t cost a lot, with package prices that may not cost more than several hundred dollars. Even their most basic packages can be truly convenient, and those may not cost a hundred dollars.

These services do a lot of things, starting with the formation of your professional corporation. They’ll deal with the Secretary of State on your behalf, and help you with all the necessary paperwork. They even have templates you can use for your documents and records.

Most of the leading online incorporation services also provide registered agent services, often as a free service as part of the package for at least the first year. They will provide online document storage and help make sure that you comply with all requirements.

You don’t have to do this alone. Sure, you may be a professional in your profession. But when it comes to forming your professional corporation, you’d do well to trust the professionals in this particular field.