By Jake Lawson, LLC Formation Strategist & Tax Advisor
Considering a sole proprietorship in Washington? Before you jump in, let me share some hard-earned wisdom from 15 years of helping entrepreneurs make this decision.
Washington is unique—it’s one of the few states that actually requires all businesses (including sole proprietorships) to get a state business license. That $90 fee might have you wondering: if I’m paying anyway, why not just spend the extra $110 and get LLC protection?
That’s exactly the question you should be asking. After guiding over 1,200 business launches, I can tell you that Washington’s licensing requirements change the sole proprietorship equation significantly.
What Is a Washington Sole Proprietorship, Really?
A sole proprietorship in Washington is the simplest business structure you can operate—essentially, it’s you doing business under your own name without forming a separate legal entity.
The moment you start any money-making activity in the Evergreen State—whether that’s freelance web design from your Seattle apartment or selling handcrafted goods at Pike Place Market—you’re automatically operating as a sole proprietor.
But here’s the Washington twist: unlike most states where sole proprietorships fly completely under the radar, Washington requires you to register with the state and pay licensing fees. You’re not completely “off the books” anymore.
The Sole Proprietorship Advantages (The Short List)
Quick Business Launch
No complex formation documents, no waiting for state approval. You can start earning money immediately while handling the licensing paperwork.
Simplified Tax Structure
Your business income flows directly to your personal tax return via Schedule C. If you’re already filing taxes in Washington (which has no state income tax, lucky you), this adds minimal complexity.
Lower Upfront Costs
A sole proprietorship with basic licensing runs about $90-95, compared to $200+ for an LLC. However, this advantage is smaller in Washington than most states.
The Sole Proprietorship Disadvantages (The Long, Scary List)
Zero Personal Asset Protection
This is the killer issue. In a state with as much wealth and property value as Washington, going without liability protection is particularly risky.
If your business faces a lawsuit—client injury, contract dispute, copyright claim—your personal assets are completely exposed. That includes your house (whether it’s a $300K starter home in Spokane or a $1.2M place in Bellevue), your car, savings, even retirement accounts.
I’ve seen Seattle contractors lose personal homes over business disputes. It’s brutal.
Limited Business Credibility
Try landing a contract with Amazon, Microsoft, or Boeing as “Jennifer Smith” versus “Northwest Digital Solutions LLC.” The difference in perceived legitimacy is massive.
This credibility gap affects more than just Fortune 500 clients—it impacts banking relationships, vendor terms, and even customer trust.
The Conversion Nightmare
Washington’s licensing requirements make converting from sole proprietorship to LLC more complex than in most states. You’ll need to:
- Cancel your sole proprietorship business license
- File new LLC paperwork with the Secretary of State
- Apply for a new business license under the LLC name
- Update all contracts, bank accounts, and vendor relationships
- Potentially re-apply for industry-specific licenses
It’s a bureaucratic maze that can take months to navigate.
Washington’s Unique Licensing Requirements
Unlike most states, Washington requires all businesses to obtain a state business license through the Department of Revenue. This isn’t optional for sole proprietorships—it’s mandatory.
The Washington Business License Application Process
Cost: $90 base fee (plus $5 if you want a DBA/Trade Name)
What’s included:
- State business license
- Tax registration with Washington Department of Revenue
- Trade Name (DBA) registration (optional)
- Some local licensing (varies by location)
Required steps:
- Create a SecureAccess Washington account
- Complete the online Business License Application
- Pay the $90 fee
- Wait for processing (typically 7-10 business days)
Local Licensing Requirements
Most Washington cities and counties require additional business licenses. Some can be obtained through the state application, others require separate filings through FileLocal.
Examples of common local requirements:
- Seattle: Business license ($110+ annually)
- Spokane: Business registration ($25+ annually)
- Tacoma: Business license ($35+ annually)
- King County: May require additional permits
Sole Proprietorship vs. LLC in Washington: The Real Numbers
Let’s cut through the marketing fluff and look at actual costs and benefits:
| Factor | Sole Proprietorship | Washington LLC |
| State Filing Fee | $90 (business license) | $200 (Certificate of Formation) |
| Personal Asset Protection | None | Complete protection |
| Business Credibility | Low | High |
| Tax Complexity | Simple (Schedule C) | Same for single-member LLCs |
| Annual Requirements | License renewal (~$90) | Annual report ($71) |
| Total Year 1 Cost | $90-200+ | $200-400+ |
My analysis: For just $110 more upfront, you get liability protection worth potentially millions. In Washington’s litigious business environment, that’s a bargain.
How to Start Your Washington Sole Proprietorship (Step-by-Step)
If you’re determined to go the sole proprietorship route despite my warnings, here’s how to do it properly:
Step 1: Business Foundation Planning
Before touching any paperwork, establish these fundamentals:
Business Model: Define exactly how you’ll make money. Washington’s licensing application asks specific questions about your business activities.
Business Name: You can operate under your legal name or file a Trade Name (DBA) for $5 extra during the licensing process.
Business Location: Washington requires a physical address for licensing. This can be your home, but consider privacy implications—this address becomes part of public records.
Industry Classification: You’ll need to identify your business type using North American Industry Classification System (NAICS) codes for the licensing application.
Step 2: Get Your Federal EIN
While not required by Washington, I strongly recommend getting an Employer Identification Number (EIN) from the IRS before applying for your business license. Here’s why:
Identity Protection: Keep your Social Security Number off business documents and public filings.
Banking Requirements: Most Washington banks require an EIN for business accounts, even for sole proprietorships.
Future Flexibility: If you ever hire employees or convert to an LLC, you’ll need an EIN anyway.
How to apply: Go directly to the IRS website (irs.gov) and apply online. It’s free and takes about 10 minutes. Avoid third-party services charging fees—they’re unnecessary.
Step 3: Complete the Washington Business License Application
This is where Washington differs from most states—you must register with the Department of Revenue.
Create your account: Sign up for SecureAccess Washington at secure.dor.wa.gov
Gather required information:
- Business name and address
- Your SSN or EIN
- Business activity description
- Ownership information
- Estimated start date
Complete the application: The online system walks you through multiple sections covering:
- Basic business information
- Tax registration
- Trade Name registration (if desired)
- Local licensing (where applicable)
Pay the fee: $90 for basic licensing, plus $5 if you’re registering a Trade Name.
Step 4: Handle Local Licensing
Depending on your location and business type, you may need additional local licenses or permits.
Check requirements through:
- Your city’s business licensing department
- County licensing offices
- FileLocal.wa.gov (for some municipalities)
Common local requirements:
- Home-based business permits
- Professional licensing
- Health department permits (food service)
- Fire department permits (certain industries)
Step 5: Set Up Business Banking
Washington banks are generally sole proprietorship-friendly, but requirements vary.
What you’ll need:
- Photo ID
- Business license from Washington
- EIN confirmation letter (if you got one)
- Trade Name certificate (if applicable)
Banking tips:
- Shop around—fees and requirements vary significantly
- Consider credit unions for better small business terms
- Ask about business credit cards and loan products
Washington Tax Obligations for Sole Proprietors
Federal Tax Requirements
Schedule C: Report business income and expenses on your personal tax return.
Self-Employment Tax: Pay both employer and employee portions of Social Security and Medicare taxes (15.3% on net earnings).
Quarterly Payments: If you expect to owe $1,000+ in taxes, make quarterly estimated payments.
Washington State Tax Considerations
No State Income Tax: Washington doesn’t tax personal or business income—a major advantage for sole proprietors.
Business & Occupation Tax: Depending on your business type and revenue, you may owe B&O tax. Most sole proprietorships qualify for small business credits that eliminate this tax.
Sales Tax: If you sell taxable goods or services, you must collect and remit sales tax. This registration happens automatically when you get your business license.
Other Taxes: Depending on your business, you might owe:
- Public Utility Tax
- Timber Tax
- Insurance Premium Tax
Industry-Specific Considerations in Washington
Technology/Software Development
Washington’s tech-heavy economy means lots of liability exposure. One bad software update or data breach could cost millions. LLC protection is almost essential.
Food Service/Restaurants
Health department regulations, liquor licensing, employee safety—the liability risks are enormous. Don’t operate without proper business structure and insurance.
Construction/Contracting
Washington requires contractor licensing for most construction work. The licensing board prefers dealing with formal business entities, and clients expect LLC protection.
Professional Services
Many professional licensing boards in Washington require errors and omissions insurance, but that doesn’t replace the need for personal asset protection.
Common Washington Sole Proprietorship Mistakes
After helping hundreds of Washington entrepreneurs, I see these errors repeatedly:
Mistake #1: Assuming Licensing Equals Protection
Getting a business license doesn’t provide any liability protection. You’re still personally responsible for all business debts and obligations.
Mistake #2: Ignoring B&O Tax Requirements
Washington’s Business & Occupation tax can be complex. Many sole proprietors discover they owe back taxes because they didn’t understand the filing requirements.
Mistake #3: Mixing Business and Personal Finances
This is especially problematic in Washington because of the state’s tax auditing practices. Keep separate accounts from day one.
Mistake #4: Underestimating Local Requirements
Seattle, Tacoma, Spokane, and other cities have their own licensing requirements beyond the state license. Don’t assume the state license covers everything.
When to Convert to an LLC
Several situations should trigger the LLC conversation:
Revenue Thresholds: Once you’re consistently earning $75,000+ annually, the liability protection becomes critical.
Client Requirements: Many larger Washington employers and government contracts require vendors to have formal business structures.
Employee Plans: Hiring employees as a sole proprietor creates additional liability and complexity. LLCs handle employment much better.
Asset Accumulation: As your personal wealth grows (especially real estate in Washington’s appreciating market), protection becomes more valuable.
My Honest Recommendation for Washington Entrepreneurs
Here’s my bottom line after 15 years in this business: Washington’s licensing requirements eliminate most advantages of sole proprietorships.
Consider sole proprietorship if:
- You’re testing a very low-risk business idea (under $25K annual revenue)
- You absolutely cannot afford the extra $110 for LLC filing
- You plan to convert to LLC within 6-12 months
Choose LLC if:
- You’re serious about building a sustainable business
- You have any liability exposure whatsoever
- You want credibility with clients and vendors
- You can afford the modest additional cost
In Washington’s business-friendly environment, with no state income tax and reasonable LLC fees, the choice seems clear to me. The $110 difference between sole proprietorship and LLC is one of the best insurance policies you can buy.
Step-by-Step LLC Alternative
If my arguments have convinced you to consider an LLC instead, here’s the simple path in Washington:
- Choose your LLC name (check availability through Washington Secretary of State)
- File Certificate of Formation ($200 fee)
- Get your business license (same $90 process as sole proprietorships)
- Create an Operating Agreement (even for single-member LLCs)
- Open business banking (easier with LLC documentation)
The whole process takes about 2-3 weeks and provides protection that could save your financial future.
Frequently Asked Questions
Do I need to register my sole proprietorship with Washington state?
Yes, unlike most states, Washington requires all businesses (including sole proprietorships) to obtain a business license through the Department of Revenue.
Can I operate a sole proprietorship from my home in Washington?
Yes, but check local zoning and licensing requirements. Many cities require home-based business permits in addition to state licensing.
What’s the difference between a Trade Name and a DBA in Washington?
They’re the same thing. Washington calls it a “Trade Name,” but it functions exactly like a DBA (Doing Business As) in other states.
Do I need business insurance as a sole proprietor in Washington?
The state doesn’t require it, but it’s essential. Your personal assets are completely exposed without proper liability coverage.
Can I hire employees as a Washington sole proprietor?
Yes, but you’ll need an EIN, workers’ compensation insurance, and must comply with state employment laws. At this point, an LLC makes much more sense.
How do I convert my sole proprietorship to an LLC later?
It’s not a simple conversion—you’ll essentially close the sole proprietorship and start a new LLC, updating all licenses, contracts, and banking relationships.
The Bottom Line on Washington Sole Proprietorships
Washington’s mandatory business licensing changes the sole proprietorship game significantly. When you’re already paying $90+ in fees and dealing with state registration, the additional cost and complexity of an LLC becomes much more reasonable.
The liability protection alone is worth the extra cost in Washington’s litigious business environment. Add in the credibility benefits and easier scalability, and the LLC starts looking like the obvious choice for most entrepreneurs.
My final advice: Unless you’re absolutely cash-strapped or testing a ultra-low-risk concept, spend the extra money and start with an LLC. Your future self will thank you when you’re not worried about losing your Bellevue condo over a business dispute.
Ready to make the smart choice? Check out our comprehensive Washington LLC formation guide or browse our honest reviews of formation services that can handle the paperwork for you.
Looking for more state-specific guidance? Explore our complete library of business formation guides, where we cut through the marketing hype to give you the real story on what works and what doesn’t.
About Jake Lawson: With 15+ years guiding entrepreneurs through business formation decisions, Jake has helped over 1,200 founders choose the right structure for their goals. His Washington-specific expertise comes from working with everyone from Seattle tech startups to Spokane service businesses, always prioritizing long-term protection over short-term savings.