Washington State and S Corporations: What You Need to Know

If you own a small business in Washington State, you might be wondering if S corporations are accepted there. Yes, Washington State does recognize S corporations, to address your question. A corporation that is taxed differently from a C corporation is a S corporation. The corporation’s profits and losses are passed through to the shareholders, who record them on their individual tax returns rather than the corporation paying taxes on them.

You might be asking how to convert from an LLC to a S corporation in Washington State if you’re currently conducting business as an LLC. You must submit Form 2553 to the IRS in order to do this. Within 75 days of the commencement of the tax year for which you desire to be taxed as a S corporation, you must submit this form. A duplicate of this form must be sent to the Washington Secretary of State as well.

One advantage of operating as a S corporation is that you can take distributions from the remaining profits after paying yourself a fair wage. Your wage should be appropriate for the work you do and the field you work in. You can save on taxes because distributions are not subject to self-employment tax.

There are advantages and disadvantages to both an LLC and a single proprietorship when deciding which to use. The simplest and most straightforward business structure is a sole proprietorship, however it does not provide liability protection. On the other hand, an LLC provides limited liability protection but demands additional administration and upkeep costs.

If you run a business in Washington State, you might also be curious about the price of a small business license. Depending on the type of business you have and where it is located, the cost varies. For instance, a basic business license in Seattle costs $110 a year. The price in Tacoma is $95 a year. You should also ask your city or county whether any additional licenses or permits are needed.

In conclusion, Washington State does recognize S corporations. To convert from an LLC to a S corporation, you must submit Form 2553 to the IRS and the Washington Secretary of State, along with a copy of the form. By taking a reasonable salary and dispersing the remaining income, you can pay yourself from your LLC. When deciding between an LLC and a sole proprietorship, take into account the amount of liability protection you require as well as the paperwork and costs involved. Last but not least, the price of a small business license in Washington State differs based on your location and type of business, so make sure to ask your city or county for any additional needs.