Washington State
Department of Labor & Industries
Do You Hire Independent Contractors?
In some cases, a person you consider an independent contractor may actually be a worker with legal protections that cannot be waived. If so, you may be considered an employer with workers covered under Washington State workers’ compensation laws without even realizing it.
It is important to understand your responsibilities. Otherwise, your business could face unexpected regulatory penalties and even legal claims.
In Washington, anyone who performs work is presumed to be a worker covered by the workers’ compensation system unless they meet one of the limited exceptions established by law.
If the person you hire is considered a covered worker under Washington State law, you have certain legal obligations as an employer, including:
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Maintaining accurate records.
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Paying workers’ compensation insurance premiums.
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Complying with Washington State labor laws.
Keep in Mind:
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Calling someone an “independent contractor” does not automatically exempt them from legal requirements related to workers’ compensation.
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In some cases, a person may qualify as an independent contractor under one contract but not under another. Each contract must be evaluated separately.
A person may be considered an independent contractor for federal tax purposes while also being considered a covered worker for workers’ compensation purposes in Washington State.
Other government agencies, such as the Employment Security Department (ESD) and the Internal Revenue Service (IRS), have their own laws and regulations regarding independent contractors.
Consult those agencies or your professional advisors to ensure that you comply with all applicable requirements.
Washington State
Department of Revenue
Does Your Business Need to Charge Sales Tax in Washington?
Starting October 1, 2025, Washington expanded Sales Tax to several professional services, meaning many businesses may now be required to collect and remit this tax.
Some of the affected services include:
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Advertising and marketing.
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IT services and technical support.
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Website design and development.
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Custom software.
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Temporary staffing.
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Security and investigation services.
Some services remain exempt, including web hosting, domain registration, standard software, certain educational services, and telehealth services.
Additionally, new exemptions took effect on July 1, 2026, for certain services and organizations.
What should your business do?
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Determine whether your services are subject to Sales Tax.
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Update invoices and customer contracts.
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Collect and report Sales Tax to the Washington Department of Revenue (DOR).
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Take advantage of the temporary penalty relief program, if eligible.
Failing to comply with these changes may result in penalties and additional tax liabilities. If you're unsure how these updates affect your business, it's best to review your tax obligations as soon as possible.
Washington State
Department of Labor & Industries
The 5 most common payroll mistakes every Washington business should avoid.
1. Failing to Report Employee Hours Accurately: Incorrectly reported work hours can lead to payroll discrepancies, inaccurate employee payments, and future payroll adjustments.
2. Using the Wrong Employee Classification: Assigning employees to the wrong classification can affect your L&I costs and may require corrections.
3. Misclassifying an Employee as an Independent Contractor: Improper worker classification can result in additional obligations and reviews by the appropriate government agencies.
4. Not Keeping Complete Payroll Records: Maintaining accurate timecards, contracts, and payroll records helps your business stay compliant with labor and tax requirements.
5. Filing Reports Late or with Errors: Late or inaccurate reports may result in penalties, interest charges, and delays in administrative processes.
Washington State
LLC vs. Sole Proprietor in Washington: Which Is the Best Option for Your Business?
When starting a business in Washington, one of the first decisions you need to make is choosing the right legal structure. Two of the most common options are a Sole Proprietorship and a Limited Liability Company (LLC).
Although both allow you to legally operate a business, there are important differences when it comes to protection, management, and business growth.
Sole Proprietorship
A Sole Proprietorship is the simplest and most affordable way to start a business. The owner and the business are considered the same legal entity.
Advantages
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Easy to establish.
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Fewer administrative requirements.
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Lower startup costs.
Disadvantages
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Does not provide protection for personal assets.
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The owner is personally responsible for the business’s debts and obligations.
LLC (Limited Liability Company)
An LLC creates a legal entity separate from the owner, which can help protect personal assets from many business liabilities.
Advantages
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Greater legal protection.
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More credibility with clients and vendors.
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A good option for businesses planning to grow.
Disadvantages
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Requires formation and ongoing maintenance costs.
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Has additional administrative requirements.
Which One Is Right for You?
If you are starting a small, low-risk business, a Sole Proprietorship may be sufficient.
If you want to protect your personal assets, present a more professional business image, or grow your company, an LLC is often a better alternative.
Conclusion
There is no single option that is ideal for every business. The best choice depends on your business activity, level of risk, and goals.
Choosing the right business structure from the beginning can help protect your business and make future growth easier.