What Washington expects from a new trade business

Every contractor registers with L&I, with a bond and insurance

Washington's system is registration through the Department of Labor & Industries, as a general or specialty contractor. You'll need a surety bond of $30,000 (general) or $15,000 (specialty) and general liability insurance. The statute sets at least $50,000 property damage and $100,000 per person, $200,000 per occurrence. L&I's page lists $200,000 public liability with $50,000 property damage, or a combined $250,000, and says L&I must be a certificate holder. L&I lists $150.20 for both the application and renewal, and registration lasts two years.

Plumbing and electrical carry their own licensing and exams, also through L&I.

The handyman exemption is tiny: work under $500 total, labor and materials, and not part of something bigger. Offering, bidding or working unregistered is a gross misdemeanor, and so is using an unregistered sub. You also can't sue to collect unless you prove you were registered and kept your bond and insurance in force. An insurance agent who writes contractors can confirm the current insurance requirement.

Source: L&I, Register as a contractor · RCW 18.27.020 · RCW 18.27.040 · RCW 18.27.050 · RCW 18.27.080 · RCW 18.27.090 · RCW 19.28.041 · RCW 18.106.020 · RCW 18.27.060

Who to call: an attorney near you

Comp comes from the state, not an insurance agent

Washington is a monopolistic state. Every covered employer either buys from the state fund at L&I or qualifies as a self-insurer. There's no private comp market to shop, and the law has no minimum employee count, just a short list of excluded employments.

Sole proprietors and partners are excluded, and can elect in. LLC members depend on who runs the company. If members manage it, a member is excluded only if they'd qualify as a sole proprietor or partner. If managers run it, the test is the corporate officer test. Corporate officers have their own narrower test.

Subs are the trap. Whoever lets the contract is primarily responsible for premiums on that work. A registered contractor is off the hook only if the sub meets a list of tests, including being registered or licensed, having its own place of business and keeping separate books. Check your sub's status before they start.

Source: RCW 51.14.010 · RCW 51.12.020 · RCW 51.12.070 · RCW 51.12.110

Who to call: an insurance agent near you

Getting paid: skip one form and you may have no lien at all

Washington ties your lien to a disclosure most people forget:

• Disclosure statement: on residential work (four units or fewer) of $1,000 or more, and commercial buildings priced from $1,000 up to under $60,000, give the customer the state's notice before you start. Without it, you can't bring a lien claim on that contract. It doesn't apply to work between contractors.
• Notice of right to lien: not for owner-direct contractors or labor-only claims. Subs hired by the prime skip it on most jobs, but must send it on an existing owner-occupied single-family home, where the lien reaches only what the owner hasn't yet paid the prime. Sent by certified mail or served in person, it only protects the last 60 days. On a new single-family home, only the last 10 days. Send it early.
• Record: file with the county within 90 days of the day you stopped furnishing. Each separate residential unit has its own clock.
• Copy to the owner: within 14 days of filing the claim, or you lose fees and costs against the owner.
• Sue: within 8 calendar months of recording, and serve the owner within 90 days of filing the lawsuit.

Optional: if you're not paid within 5 days of the due date, you can notify a construction lender within 35 days of that date. Primes on projects over $5,000 must post the job information at the site. A construction attorney can set up your forms once.

Source: RCW 18.27.114 · RCW 60.04.031 · RCW 60.04.091 · RCW 60.04.141 · RCW 60.04.101 · RCW 60.04.221 · RCW 60.04.230

Who to call: an attorney near you

You charge sales tax on the whole job, labor included

This is the opposite of most states. In Washington, a prime contractor collects retail sales tax from the customer on the full contract price, labor and materials together. It isn't a tax on just your materials, and it isn't optional. Quote it that way so it doesn't come out of your margin.

Then there's B&O tax, a tax on gross receipts instead of profit. Primes report under retailing and subs under wholesaling, both on the gross contract price. Through December 31, 2026, retailing is 0.471% and wholesaling 0.484%. From January 1, 2027, both are 0.5%. You owe it even on a job that lost money, though a small business credit can reduce it.

Builders selling homes they built on their own land follow separate rules. The Department of Revenue has a construction guide, and a CPA who works with contractors can help you set up your reporting from day one.

Source: WAC 458-20-170 · WA DOR, Construction industry guide · WA DOR, Business & occupation tax · RCW 82.04.250 · RCW 82.04.270

Who to call: a CPA or tax pro near you

LLC, sole proprietor, or S-corp?

Forming an LLC with the Secretary of State costs $180 for the filing by statute. Filing online runs about $200 with the state's service charge. The annual report is $70, due by the end of your anniversary month, with a $25 delinquency fee, so $95 if you're late. You'll also need a state business license through the Department of Revenue for most activity, about $50 to apply plus any endorsements.

Washington has no individual income tax today. A new 9.9% tax starts January 1, 2028, only on income over $1 million. The tax you'll actually feel is B&O on gross receipts.

When an S-corp election pays is a numbers question. Bring what the business clears after your floor rate to a CPA and ask them to run it.

Source: WA Secretary of State fee schedule · WAC 434-112-085 · WA DOR, Income tax · WA DOR, Apply for a business license

Who to call: a CPA or tax pro near you