Question 1

Are we required to have an operating agreement?

Accepted Answer

Washington state does not require LLCs to have a written operating agreement, but you probably should have one anyway. Without it, your business is governed by state default rules that may not reflect what you and your partners intend, and disputes get expensive fast. If you’re the only member of your LLC, a written operating agreement can reinforce the company’s status as a separate legal entity, which better protects the owner’s personal assets from business liabilities.

Question 2

Should we trademark our name and logo?

Accepted Answer

You might want to register your name and logo with the USPTO if you sell products or services online or across state lines and want to protect your brand. While trademark rights actually come from using your name or logo in business, not from registering them, registration gives you stronger tools to stop infringement and this can boost their value to your company.

Question 3

Can we use 1099 contractors instead of employees?

Accepted Answer

Whether a person is an independent contractor or employee depends on how they actually work, not how you label them. Washington applies a multi-factor test, and L&I regularly audits misclassified contractors. If you control when, where, and how someone works to any degree, they're probably an employee, and misclassification can mean back taxes, penalties, and unpaid benefits.

Question 4

My partner wants out and we don’t have a buy-sell agreement. How do we figure out what their share is worth, and do I have to come up with the cash now?

Accepted Answer

Without a buy-sell agreement, there's no predetermined formula for valuing your partner’s share when they decide to leave, and this can get tricky. A buy-sell agreement is a contract between business co-owners that outlines how a partner's share of the business will be valued and reassigned or sold if they leave, retire, become disabled, or pass away. Without one, it is common to have a third party establish the company's fair market value, and then to negotiate a structured buy-out over time rather than paying a lump sum. Involving an experienced business attorney early in a partner buy-out can save you significantly more than it costs.

Question 5

Someone approached me about buying the business. I have no idea what it's worth or what I should be asking for. What do I need to do before I even have that conversation?

Accepted Answer

Before you talk numbers with any potential buyer of your business, it’s a good idea to get your financials in order, consider a professional valuation, and have them sign a confidentiality agreement. Taking these steps, and talking with your attorney and CPA at this stage, can mean the difference between a life changing deal and one you regret.