Asset Protection Washington State LLC
Washington State is one of the hidden gems for the whole industry of tax free incorporating.
Washington State has a great nexus statute stating that people who do not have nexus in the State do not owe any tax.
Why is this important? People forming companies in Wyoming, Nevada, Delaware, and Florida are doing so because those States don't have personal income tax. These same people also have trouble establishing the legitimacy of these companies as real companies. A lot of other State agencies look at Nevada LLCs as tax shelters for Californians.
Because Washington State has a gross receipt tax of 1.8% it is not looked at as a tax shelter. Washington has no personal income tax for residents. Washington does not have corporate income tax, but it has a gross receipts tax called a Business and Occupation tax (It's 1.8% of your gross income derived in WA State).
The important part of this is WAC 458-20-19401 as described on the WA dept of revenue website: http://dor.wa.gov.
It basically states that anyone having a holding company formed in Washington does not owe tax if they don't meet any of the following thresholds:
- You have more than $50,000 of payroll in Washington State for your holding company
- You have more than $50,000 of property in Washington State for your holding company
- You have more than $250,000 of gross income in Washington State for your holding company
- At least 25% of your total property, payroll, or income is in Washington State for your holding company.
This was recently clarified June of 2010 and gives people outside of Washington State a completely tax free holding company from a State where people will view the company as a more legitimate entity than a Nevada Holding company, Wyoming holding company, or Delaware holding company.
Now if you're going to live in Washington State and/or operate in Washington State, this whole plan is completely thrown out the window, and you'll be completely taxable if you meet the above thresholds.
You can call the department of revenue for more clarification if you don't want to take our word on it: 1-800-647-7706 or visit the WAC here: http://apps.leg.wa.gov/wac/default.aspx?cite=458-20-194
What the new law (Senate bill 6143, Chapter 23) enacted June of 2010 does do though, is basically screw over every rich person in Washington State that has holding companies in other States…
It states that a person who is a resident or domiciled in the State of Washington and running or owning another company then creates nexus for that company…
Chapter 23 of the same bill states that Corporate directors must pay B & O tax for their compensation (1.8%) if more than $12,000 a year.
What Washington has failed to understand is that there are a lot of well off people in Seattle that drive our States economy and happen to own a lot of assets outside of this State. This bill tries to reach farther into their pockets and get more tax out of them. The plus side is that it further clarifies that people not doing business in Washington are tax free.
The bottom line:
If you're never going to work in Washington State, it's a great place to form a Washington LLC or start a Washington Corporation. The annual report fee is only $69.00 where Nevada's is $325.00, Delaware is $250.00 for an LLC, and could be a lot more for a corporation if you have a lot of shares, and Wyoming is still the cheapest at $52.00. The main point of setting up an asset protection holding company in Washington State is having it look like a more normal business than something set up in Wyoming, Nevada, or Delaware.
When we form the Washington holding company, we'll set up the company with our address, hide your address on all the State documents, and if you'd really like, you can sign up for our economical mail forwarding service and have all your regular mail sent to us and forwarded on to you. (State mail is always included in our $65.00 a year registered agent service).