Written by Kim Sandher, JD 16 Years Handling Commercial Real Estate Matters in Seattle Washington State Bar #42630 | Admitted 2010 U.S. District Court, Western District of Washington, Admitted 2011 Recognized: Best Lawyers in America® 2026 | Best Law Firms® 2026, Regional Tier 2 Seattle |
A business owner signs a commercial lease in Seattle. The LLC name is on the signature line. The problem: the LLC wasn’t formed yet. The owner signed as an individual. The lease is valid. The personal liability is real. The protection they thought they had doesn’t exist.
This happens more often than it should. The entity gets formed after the lease is signed, or it gets formed but nobody confirms that the person signing actually has authority to bind it. Either way, the liability protection disappears at exactly the moment it matters most.
K&S Canon handles entity formation as part of commercial real estate practice in Seattle. We form LLCs and corporations, draft operating agreements, and structure ownership for businesses signing leases, purchasing commercial property, or entering joint ventures. See our corporate law practice page and our commercial leasing page.
LLC or corporation: which is right for a Seattle business?
SHORT ANSWER For most Seattle small businesses and real estate holding structures, a Washington LLC is the standard choice. It provides liability protection, pass-through taxation, and management flexibility without the formality requirements of a corporation. A Washington S-corporation or C-corporation makes sense when the business has investors, anticipates significant outside capital, or has specific tax planning needs. The structure affects how you sign contracts, how profits are taxed, and how your personal assets are protected. |
Most commercial real estate transactions in Seattle involve LLCs rather than corporations. A business owner leasing retail space, an investor purchasing a commercial building, a group of partners acquiring a property for development, each of these typically uses an LLC. The reasons are practical: LLCs under
Washington’s LLC Act (RCW 25.15) offer liability protection, pass-through taxation, and flexible governance without requiring a board of directors, annual shareholder meetings, or the corporate formality structure. For most small to mid-size commercial real estate transactions, the LLC is the right tool.
That said, the right entity depends on the specifics. Here is a comparison of the main options:
Entity type | Best for | Key considerations |
Washington LLC (RCW 25.15) | Small businesses, real estate holding, professional practices, joint ventures | Pass-through taxation, no corporate formality, flexible operating agreement, personal guaranty still required on many commercial leases |
Washington S-Corporation (RCW 23B) | Businesses with multiple owners, payroll/self-employment tax planning | Shareholder restrictions, required corporate formalities, salary requirements for owner-employees |
Washington C-Corporation (RCW 23B) | Venture-backed startups, businesses seeking outside investment | Double taxation on dividends, full corporate formality, preferred stock structures for investors |
Series LLC | Not available in Washington | Washington does not recognize series LLCs; multi-property investors typically use separate LLCs per property |
One LLC per property? Many commercial real estate investors in Seattle use a separate LLC for each property. The logic: liability from one property cannot reach another. A tenant injury at one building does not expose the equity in another if each is properly isolated. This structure adds administrative overhead but is standard practice for investors with multiple properties. K&S Canon structures multi-property ownership for investors throughout King County. |
How to form a Washington LLC
SHORT ANSWER Forming a Washington LLC requires filing a Certificate of Formation with the Washington Secretary of State under RCW 25.15. The filing fee is $200 online or $180 by mail. An Initial Report is due within 120 days. Annual reports cost $70 and are due by the last day of the LLC’s anniversary month. Washington requires a registered agent with a physical Washington address. |
The mechanical steps of forming a Washington LLC are straightforward. The strategic decisions, what the entity is named, who has authority to sign on its behalf, how profits are distributed, what happens when a member leaves, require more thought than the filing itself.
Step | Details |
Choose and verify the LLC name | Must include LLC, L.L.C., or Limited Liability Company. Must be distinguishable from existing entities on the Secretary of State’s records. Search at sos.wa.gov before filing. |
Appoint a registered agent | Required under RCW 23.95.415. Must have a physical Washington street address (no P.O. boxes). Can be the owner, an attorney, or a commercial registered agent service. |
File Certificate of Formation | Filed with the Washington Secretary of State online ($200) or by mail ($180). Online processing: 2-5 business days. Mail: up to 25 business days. Expedited: $100 additional. |
File Initial Report | Due within 120 days of formation. $10 fee if filed separately; free if filed with the Certificate of Formation online. |
Draft operating agreement | Not required by law but essential. Governs management structure, member authority, profit distribution, and exit rights. A missing or vague operating agreement is the most common source of LLC disputes. |
Obtain EIN and business license | Federal EIN from the IRS (free, online). Washington business license through the Department of Revenue. Required for banking and tax compliance. |
File annual report | $70 annual fee due by the last day of the LLC’s anniversary month. Missing the deadline triggers a $25 delinquency fee. Extended non-compliance leads to administrative dissolution. |
Why the operating agreement matters more than the filing
SHORT ANSWER The Certificate of Formation creates the LLC. The operating agreement governs it. Washington does not require operating agreements, but without one, member disputes over management authority, profit distribution, and exit rights are resolved by default statutory rules that may not reflect what the members actually intended. For any LLC signing commercial leases or purchasing property in Seattle, a written operating agreement is not optional. |
The most common LLC dispute pattern in commercial real estate is not creditor liability. It is members disagreeing about who has authority to sign on behalf of the entity, how profits get distributed when one member does more work than another, or what happens when one member wants out. A well-drafted operating agreement resolves all of these before they become problems.
Management structure: member-managed vs. manager-managed
Washington LLCs default to member-managed, meaning all members share management authority and each can bind the LLC on contracts. For a two-person LLC where one partner handles operations and the other is a passive investor, this default can create problems. A manager-managed LLC designates a specific manager with signing authority, while passive members hold economic interests without management rights. Which structure fits depends on the ownership arrangement.
Signing authority and commercial leases
A commercial landlord in Seattle will require an authorized representative to sign a lease on behalf of the LLC. The operating agreement should identify who has authority to bind the entity on leases, purchases, and financing. Without clear authority language, a landlord may require additional documentation before accepting a signature. Under RCW 25.15.151 (member-managed LLCs) and RCW 25.15.154 (manager-managed LLCs), each member or designated manager has authority to bind the LLC on matters in the ordinary course of its activities. A person acting outside their authority may leave the LLC and themselves personally exposed.
What to include in a Washington LLC operating agreement
Provision | Why it matters |
Member names and ownership percentages | Establishes who owns what and in what proportion |
Management structure | Member-managed or manager-managed; who has signing authority |
Capital contributions | What each member put in, and what happens if more capital is needed |
Profit and loss allocation | How income and losses are distributed among members |
Distributions | When and how cash is distributed; distinguishable from guaranteed payments |
Member exit and buyout | What happens when a member wants to leave, dies, or becomes incapacitated |
Transfer restrictions | Right of first refusal before a member can sell their interest to a third party |
Dissolution | How the LLC winds down if the members decide to end it |
When an LLC does not protect you
SHORT ANSWER An LLC’s liability protection has limits. Personal guaranties on commercial leases bypass the entity structure entirely. Commingling personal and business funds, signing contracts in your personal name instead of the LLC’s name, and failing to maintain the entity’s good standing are the most common ways business owners in Seattle lose the protection they formed the LLC to get. |
Forming an LLC creates a legal separation between the business and the owner. That separation protects personal assets from business liabilities. But the protection is not automatic or absolute, and there are several ways it disappears in practice.
The personal guaranty
Most commercial landlords in Seattle require a personal guaranty from the business owner, even when the tenant is an LLC. Seattle’s SMC 6.104 (effective January 27, 2024) now caps personal guaranties on eligible commercial leases at two years of base rent plus landlord-funded tenant improvements, but office leases remain uncapped. The guaranty means the owner is personally liable for the lease obligations regardless of the LLC structure. See our commercial leasing page for full details on SMC 6.104.
Commingling funds
Paying personal expenses from the LLC’s bank account, or depositing business revenue into a personal account, is the single most common way business owners undermine LLC protection. Courts can pierce the corporate veil, treating the LLC and owner as one entity, when the owner fails to maintain a genuine separation. This means keeping separate bank accounts, separate credit cards, and separate records from day one.
Signing in the wrong name
A contract signed as “John Smith” rather than “John Smith, Manager, Smith Properties LLC” is a personal obligation, not an LLC obligation. Every contract, lease, and purchase agreement signed on behalf of the LLC must identify the entity and the signer’s authority. This seems obvious but is one of the most frequently missed steps in practice, particularly when deals move fast.
Administrative dissolution
A Washington LLC that misses its annual report filing loses its good standing with the Secretary of State and can be administratively dissolved. A dissolved LLC may not be able to enforce its contracts in Washington courts and loses the liability protection it was formed to provide. Annual reports are due by the last day of the LLC’s anniversary month. The fee is $70. Missing it triggers a $25 delinquency fee.
Entity formation at K&S Canon
SHORT ANSWER K&S Canon handles LLC and corporation formation as part of commercial real estate and corporate practice in Seattle. We form entities, draft operating agreements, and structure ownership for businesses signing leases, purchasing commercial property, and entering joint ventures throughout King County. Kim Sandher, JD, Washington Bar #42630. (206) 507-4009. |
Entity formation at K&S Canon is connected to the transaction it serves. We form LLCs for tenants before they sign commercial leases, for investors before they close on a purchase, and for partners entering joint development agreements. The formation itself is straightforward. Getting the operating agreement right, confirming the entity’s authority to execute the specific transaction, and structuring ownership to protect members over time, takes more careful attention.
We also handle corporate law matters for existing businesses, including operating agreement amendments, member buyouts, and entity conversions. If you have an existing LLC that needs its operating agreement updated before a lease or purchase, we handle that as well.
K&S Canon PLLC: Entity Formation Kim Sandher, JD | Washington Bar #42630 1200 5th Avenue, Suite 1950, Seattle, WA 98101 Phone: (206) 507-4009 |
Frequently asked questions: entity formation in Seattle
The Washington Secretary of State charges $200 for online filing of a Certificate of Formation, or $180 by mail. An Initial Report is due within 120 days ($10 fee if filed separately, free if filed with the Certificate of Formation online). Annual reports cost $70 per year, due by the last day of the LLC’s anniversary month. Expedited processing is available for an additional $100.
No. Washington does not require an operating agreement to form an LLC. But without one, the LLC’s management structure, member authority, and profit distribution are governed by default statutory rules under RCW 25.15, which may not reflect what the members intended. For any LLC signing commercial leases or purchasing property, a written operating agreement is essential.
Yes. A properly formed Washington LLC can sign commercial leases as the tenant. The person signing must have authority to bind the LLC under the operating agreement or by resolution. The signature line should identify the entity and the signer’s authority, for example: “Smith Properties LLC, by John Smith, its Manager.” Under SMC 6.104, personal guaranties on eligible commercial leases are capped at two years of base rent plus landlord TI costs.
In a member-managed LLC, all members share management authority and any member can bind the LLC on contracts. In a manager-managed LLC, a designated manager has authority to act on behalf of the entity while passive members hold economic interests without management rights. Washington LLCs default to member-managed under RCW 25.15 unless the operating agreement provides otherwise. The choice affects who can sign leases, purchase contracts, and financing documents on behalf of the entity.
Corporate veil piercing is a court ruling that treats the LLC and its owner as a single entity, removing the liability protection the LLC was formed to provide. Washington courts pierce the veil when the owner fails to maintain a genuine separation between the LLC and themselves, typically through commingling funds, failing to maintain the entity’s good standing, or using the LLC as a personal instrument without observing proper formalities. The best protection against piercing is maintaining separate accounts, signing contracts in the entity’s name, and filing annual reports on time.
Yes. RCW 23.95.415 requires every Washington LLC to maintain a registered agent with a physical street address in Washington (no P.O. boxes). The agent receives legal documents, notices, and service of process on behalf of the LLC. Failure to maintain a registered agent can result in administrative dissolution.
Many commercial real estate investors in Seattle use separate LLCs for each property to prevent liability from one property reaching another. The structure adds administrative overhead, including separate operating agreements, bank accounts, and annual filings for each entity, but is standard practice for investors holding multiple properties. Washington does not recognize series LLCs, so multi-property investors typically maintain individual entities per property. K&S Canon structures multi-property ownership for investors throughout King County.
This page provides general information about entity formation and corporate law in Washington State. It is not legal advice and does not create an attorney-client relationship. Every business structure is different. Contact K&S Canon PLLC at (206) 507-4009 to discuss your specific situation. Kim Sandher is licensed in Washington State (Bar #42630) and admitted to the U.S. District Court for the Western District of Washington.