Starting a Business in Seattle and in Washington State

That magical moment when you land on your million dollar idea is exciting, like Willy Wonka finding the golden ticket. Your thoughts turn to success, wealth, and financial freedom. Maybe you can even quit your job and devote your time to the million dollar idea or even retire. I encourage my clients to dream, develop, and refine ideas. However, as much time, if not more time needs to be spent planning on the formation and structure of what you are about to embark on. How you structure, who you are entering into business with, business planning, and how you operate and exit your business are all questions that need to be thought through and developed thoroughly before opening your doors. I published an article in 2015 about starting a business in Washington State. The article can be viewed here and it gives more information on owning a business in Washington State.  The Washington State Secretary of State has a great website on the different business entities available in Washington State. That can be viewed here. Spend some time researching and discussing with a Seattle or Washington State business law attorney to help you make the right choice for you.

I have seen many great ideas and businesses get derailed because of poor business planning and the failure to take the time to properly form and flesh out the ideas and structure of a business or idea.

Who Are You Entering Into Business With and How Do You Structure Your Business In Washington State?

This simple question can make or break your business plans very quickly. Who you enter into business with can dictate what kinds of problems you may run into later. Friends and family are close to you, they know you, why wouldn’t they be good business partners? This can be true, but I have also seen business and relationships sour because of a business dispute. The reality is, friends and family can and do fight over money, power, control, and decision-making in business.

I represented a business that was started by two high school friends. The business grew at a breakneck speed, but there was a falling out. Two owners that were once friends began flinging allegations of theft, dishonesty, distrust, and substance abuse. The business took over one year to dissolve and end. Multiple attorneys were involved as well as forensic accountants and a great deal of work. This all could have been avoided with a sound operating agreement and spending the time planning.

There is no litmus test on how to find out if your friend or relative will make a good business partner or not. What you can do is lay out the business structure and clearly define boundaries, rules, and processes before you enter into business together. You also need to think about trying to anticipate what may go wrong. Asking the difficult questions is never easy or comfortable. Now think about asking the same difficult questions to friends and family. What if you do not get along with your business partner’s spouse? What if your business partner has a substance abuse problem?

Given the variables of families, personalities, and other moving parts, you may be better served with no partners, but with that comes drawbacks. Maybe your partner can share the load, responsibility, and liability. Maybe your partner brings additional capital to fund the business. A business plan is a custom tailored plan that should fit the needs of those who own and operate the business.

How Do You Operate Your Business In Washington State?

Now that you know you want to be in business, you need to form the rules of how things get done and how things are handled. In Washington State, this is commonly referred to as an operating agreement. The operating agreement spells out the ownership, how decisions are made, how problems are handled, how profits are divided, how loss and liability is divided, how the business is funded, how the business is to be closed, what if a business partner is incapacitated, who makes business decisions, and lays out the way the business is operated. This sounds like it’s a simple task or I often hear that “my family and I get along” or “I am in business with my friend and I know they would never do me wrong.” Things happen and people generally fight over money the most. When getting into business you hope that you never have to resolve a dispute amongst business owners, but you may not always see eye to eye in business. Though this process takes work now, spend the time to get to know each other, plan the business, as this process could save you time, money, and headache later. Even if you are a sole proprietor and own the business individually, you should consider your operating agreement and what may occur in the future. Do you want the option to take on a partner? What happens if you are incapacitated, who makes decisions in your place? What if you are incapacitated and your spouse or agent needs to make decisions? The operating agreement will spell all of this out for the incoming party.

How Do You Exit Your Business In Washington State?

I recently had a client bring me a matter where there was a business dispute so bad that both parties wanted to end the partnership. The remaining issue was “How do you close the business?” and “What becomes of the partnership assets?”

Generally the partnership agreement governs the closing of the business. In this case, my clients decided to use a partnership agreement that was purchased from an office supply store because the agreement was inexpensive and easy. Just fill in the blanks and you’re good to go, right? Wrong. The agreement was a short one and a half page agreement that covered most of the usual topics. After reading the document and hearing about the nature of the dispute, the store bought partnership agreement glossed over the topics and was not customized to the specific needs of the partnership and the nature of their business. The partnership agreement did not have an attorney’s fees clause. This is an important addition because in the event of litigation, the agreement does not state whether or not the losing party pays attorney’s fees. It usually costs a significant amount of money to litigate a matter and you do not want to have to pay attorney’s fees on top of what you might be awarded.

The store bought business partnership agreement probably cost $40, but the amount that the partners would have to spend to close the business and resolve the matter was in the thousands of dollars. Spending the time with a business law attorney will help you frame out the kind of agreements, rules, and structure that your business will need.

I understand that once you have the million dollar idea or the notion to open a business you want to move quickly and capitalize on the market, but putting off proper business planning can lead to disaster. Things may be great when money is rolling in, but many times problems only worsen in slow business times. I authored an article on drafting business law agreements in Washington State and the greater Seattle area.  The article discusses the importance of taking the time to draft and customize business law documents in the greater Seattle area and Washington State.

The Washington State has an easy to use guide on how to do business in Washington State.  The website discusses and helps you through the steps of operating a business in Washington State.

STARTING A BUSINESS IN WASHINGTON STATE CHEAT SHEET

1. Define your business. What is it that you want to do?
2. Who are you getting into business with? What entity is right for you?
3. Operating agreement.
a. How do you want to operate your business and what is the structure?
b. How do you want things done?
c. How do you make decisions?
d. How are profits, losses, and liability divided?
e. What is each party brining to the table?
f. What if things go south or sour?
g. How do you sell your interest?
h. How do you exit?

The above cheat sheet on starting a business in Seattle and in Washington State only considers some of the questions that should be discussed. I do not expect the answers to be arrived at in a short time. Think on it, consider options, and alternatives. An experienced business lawyer in Seattle can help you further develop and troubleshoot your business ideas and goals.

The links provided should get you started in opening a business in Seattle or in Washington State. Make sure you take the time to thoughtfully develop and envision the business you want and the rules you want to govern your business. The time spent involving yourself in the process could prevent chaos down the road.

For more information on business law in Seattle and in Washington State, contact Rhodes Legal Group, PLLC, a Seattle area based business law firm. Rhodes Legal Group’s Business Law Section is chaired by Patrick Kwan, an experienced businessman and attorney with over 25 years of business experience owning, operating, and managing businesses. View Mr. Kwan’s bio here.

With near over 25 years of business world experience as an entrepreneur, distributor and manufacturer, Patrick Kwan is the kind of experienced business leader and lawyer who understands business from conception to sustained, profitable, on-going operation. Mr. Kwan brings his proven track record of success in innovation, leadership, business growth, management, sales, and operations to the counsel and practice of law. As an attorney, he is highly motivated, resourceful, hard-working, goal-orientated, a great team player, well-organized, and able to transcend adversity. Read more >>

Patrick Kwan

With near over 25 years of business world experience as an entrepreneur, distributor and manufacturer, Patrick Kwan is the kind of experienced business leader and lawyer who understands business from conception to sustained, profitable, on-going operation. Mr. Kwan brings his proven track record of success in innovation, leadership, business growth, management, sales, and operations to the counsel and practice of law. As an attorney, he is highly motivated, resourceful, hard-working, goal-orientated, a great team player, well-organized, and able to transcend adversity. Read more >>
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