Washington LLC: S corp or C corp?

Washington at a glance

What is different about Washington?

Washington's quirk is what it leaves out. There is no corporate income tax and no personal income tax, so no state S election, no state C corp rate and no owner-level state tax to plan around. What replaces them is the business and occupation (B&O) tax. The Department of Revenue says virtually all businesses pay it, including corporations, LLCs, partnerships and sole proprietors, and that it is a gross receipts tax. Because it is based on gross income, you cannot deduct labor, materials, taxes or other costs. That last point matters for S corp planning: paying yourself a salary does not cut the B&O bill. Your Washington tax bill depends on revenue and activity type, never on whether you filed Form 2553.

Does Washington recognize a federal S corp election?

Washington does not tax S corporations as such, because it has no corporate or personal income tax. There is no state S election form and no S corp return. Your LLC taxed as an S corp pays the same B&O tax it paid before the election. The tax is on gross income with no deduction for labor, so the salary you pay yourself does not lower it. The election changes your federal return and your payroll setup, and nothing in Olympia.

Does my LLC need a separate Washington election or form?

Washington has no state S election form because it has no corporate or personal income tax.²

What does Washington tax an S corp or LLC at the entity level?

• Washington does not tax S corporation income because the state has no corporate or personal income tax; the B&O gross receipts tax applies instead.³
• A Washington LLC pays the B&O gross receipts tax; for Service and Other Activities the 2026 rate is 1.5% under $1 million of prior-year income and 1.75% from $1 million to $4,999,999.99.⁵
• Virtually all Washington businesses pay B&O tax, including corporations, LLCs, partnerships and sole proprietors.⁷
• The B&O tax is a gross receipts tax, so there is no deduction for labor, materials, taxes or other costs of doing business.⁸
• As of January 1, 2026, the Service and Other Activities rate is 1.5% under $1 million of prior-year income and 1.75% from $1 million to $4,999,999.99.⁹

Is a Washington LLC taxed as a C corp ever better?

Washington has no corporate income tax, so a C corp pays no state tax on its profit. It pays B&O on gross receipts like every other business, at a rate set by activity. For Service and Other Activities the rate since January 1, 2026 is 1.5% if prior-year income was under $1 million and 1.75% from $1 million to $4,999,999.99. Washington also has no personal income tax, so dividends you receive are not taxed by the state.

Run your Washington numbers

Washington's B&O tax is the same whichever way you elect, so no state cost eats into an S election and no state savings come from it either. The B&O applies to revenue even in a loss year. The S election pays or does not pay entirely on federal grounds. Check B&O first when budgeting, because for a service business at 1.5% of revenue it can exceed what a profit-based state tax would take.

How much would a Washington LLC owner save as an S corp?

Assumes a 60% salary¹¹ and a single filer. Income tax is left out. C corp dividends are taxed again. Washington's B&O tax is on gross receipts and is the same whichever way you are taxed, so it is left out.

When is the Form 2553 deadline for a Washington LLC, and what if I miss it?

Late relief: federal steps, deadline guide.

What to do next

More on Washington: How to start a Washington LLC · How to start a Washington corporation · Washington LLC cost · Washington annual report · Annual report late fees by state

Common questions