Washington State Corp Tax

Discussion in 'Taxes and Accounting' started by tigerwu, May 3, 2012.

  1. tigerwu



    Is anyone familiar with the B&O tax in washington state? I am thinking of setting up a company for my trading activities. Do I need to pay B&O tax? if yes, what's the rate? Thanks.
  2. ryleg


    You might want to get a good trading accountant, as this was a huge point of contention last year and caused us to change accountants.

    Ideally you put your trading funds into an limited partnership (LP). This is run by your management company (LLC) which runs the day to day operations, pays for office space or whatever (perhaps not much money in this).

    My understanding is that your partnership fund could be virtual (A Delaware corp), and your management company could be WA based and would pay the 1.5%-ish BO tax--but only on the small amount of money that ever goes into it. The majority of your money stays in the LP and does not get taxed. Note that the LP is not subject to DE tax either (why? I don't know).

    There are probably other ways to do things, i.e. you could potentially be fine not having any company at all. I am not an accountant or lawyer. Good luck.
  3. zxd


    What is your reasoning for setting up a company for trading?
  4. johnstac


    You seriously do not want to do this in WA. I cannot speak to the investing side of things but B&O Tax here is crippling IMO. All income is taxed with NO deductions. Even the cost of doing business cannot be deducted. I certainly agree with the other poster in contacting an accountant in the state before proceeding.

  5. Are you sure about that? According to the tax foundation, Washington is rated #7 in the most favorable states to have a business in based on the tax burden for businesses.

  6. The problem with the Washington B&O tax is that it is a gross receipts tax. If you are running a business with losses or slim profits you still have to pay the full tax.

    A gross receipts tax only works for businesses with high profit margins.

    One opinion from Washington is:

    "So… You could say a couple things about business taxes in Washington.

    1. If you're going to operate a business in Washington, you better be profitable because you're not getting a break for running a bad business and losing money. This could be a blessing in disguise because not everyone is cut out to run their own business.

    2. If you're filing quarterly or yearly, at least you're out there pulling in some money. Now just figure out how to make it profitable so you can pay your Washington business taxes!"

  7. Well, personally. If I were running a business with expenses outweighing income, I'd probably not do it very long. :)

    Since WA does not have income tax, it probably more than evens out in the end (especially considering B&O is only $1,500 for every $100k). However, running a business that has more expenses than income is bad business.