How to Start a Sole Proprietorship in Washington

What is a sole proprietorship?

A sole proprietorship is a business entity owned and operated by a single individual. It is the simplest form of business ownership, where the owner of a sole proprietorship or sole proprietor assumes complete control and responsibility for all aspects of the business. 

The owner retains all the profits but is also personally liable for any debts or legal obligations of the business. Sole proprietorships are commonly chosen by freelancers, consultants, independent contractors, and small businesses operated by a single person.

What qualifies your business as a sole proprietorship?

If you are the sole owner of a business that operates independently and assumes all risks, profits, and losses of the business, then you are qualified as a sole proprietor. Any business that requires minimal capital and is possible to be run and operated by one person can qualify for a sole proprietorship in any state, including Washington. 

Who is it best for?

A sole proprietorship is best suited for individuals who want to start a small business and maintain full control and flexibility. It is commonly chosen by freelancers, self-employed individuals, and those operating small, low-risk businesses. If you are comfortable assuming personal liability for your business and value simplicity and ease of operation, a sole proprietorship may be the right choice for you.

Although there may be risks in sole proprietorships, remember that the cost of starting one doesn’t cost that much, and if you are up for the task and confident with your skills as a sole proprietor, it is a good way to start something challenging and rewarding. 

How to set up a sole proprietorship in Washington

If you want to start a sole proprietorship, all you need is a solid business idea and business plan to start. Once you have gained funding for your sole proprietorship, it is time to get to the next step, which is naming your business and getting all the required permits to operate legally. 

Name your business

For most people, naming the business is the most exciting part. You don’t need to name a sole proprietorship if you don’t want to because you can use your own legal name by default. However, you also have the option to choose a different name by acquiring a DBA. 

Using your own name

If you decide to use your own name, you don’t need to get a DBA. Since all taxation requirements and transactions will be under your social security number and personal bank account, you don’t need to obtain a DBA. 

Setting up a DBA

To set up a DBA, you pick a business name. However, you can’t use any name you want. You have to make sure the name you want is available using the Washington State Department of Revenue database here.

If the name is available, you, as the business owner, can file for a DBA online here or complete this application form and submit it in person. It costs $24 to file, and they do not require renewal. 

This guide will help you find the closest office to file if you wish to visit in person. 

How to Check if a Business Name is Taken

Obtain state licenses

Some sole proprietorships don’t need any licenses to operate. However, depending on the nature of your business, you might need a specific business license or permit to operate legally. For example, if you intend to sell liquor or tobacco, you will need a specific business permit for both. To learn more and obtain the licenses you need, you can visit the Department of Revenue website. 

Washington taxes

From a tax perspective, a sole proprietorship is considered a pass-through entity. This means that the business itself does not pay separate taxes. Instead, the owner includes the business income (business profits) and expenses on their personal tax return (Form 1040) using Schedule C. The net profit from the business is subject to self-employment tax, which covers Social Security and Medicare contributions. It is important to maintain accurate records of your business income and expenses to ensure proper tax payments are made.

Because there is no legal distinction between you and your business, you are considered as one legal entity, meaning all business taxes are paid through your personal tax returns. You’ll be responsible for paying self-employment tax, too, using your social security number. 

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