Washington has cemented its position as a tech-sector powerhouse with its flat taxation and industry-focused university system. Amazon has surpassed Boeing Co. as the largest private employer in the state in terms of employee count, Google and Facebook employ thousands of people in the Seattle region, and state authorities desire to see this trend continue.
Aside from these household names, the state has emerged as a national leader in business incubation. According to US News, the state placed fifth in venture capital fundraising in 2020, with approximately 200 enterprises receiving venture capital funding. This strength comes as digital entrepreneurs who built their fortunes during the state’s technology ascension attempt to mold a new generation of entrepreneurs.
Here are a few more small business statistics that shed light on Washington’s entrepreneurial landscape.
Quick Washington Small Business Statistics for Entrepreneurs
- Close to 99.5% of private enterprises in Washington are small businesses.
- 50.7% of employees in Washington work for small businesses.
- Military veterans make up 6.5% of employees and own 8% of small businesses.
- Racial minorities own 14.5% of businesses.
- The per capita disposable income in Washington is $62,026.
- Small businesses in Washington exported goods worth $14.1 billion in 2019.
- There are 58,230 small businesses operating in the construction industry, making it the fourth largest industry in the state.
- In 2020, start-up early survival rate for Washington was 63.43%.
- Washington’s per capita consumption expenditure is $46,574.
- The 2021 CNBC “Top States for Business” report ranks Washington 9th out of all 50 states.
Washington Small Business Statistics
1. What is considered a small business in Washington?
Entrepreneurs must adhere to industry standards set by the Small Business Administration (SBA) in order to establish a small business in Washington. The SBA defines a small business in terms of the average number of employees over a 12-month period (1–500) or average annual receipts over time ($16.5 million or less).
There are 647,639 small businesses in Washington that represent 99.5% of all private enterprises in the state. Washington accounted for 100,567 of all new business applications filed nationwide (about 5.8 million) from January 2021 to January 2022, ranking 19th among all states. Adjusting for population, Washington had 1,321 applications per 100,000 residents, which was lower than the national average and ranked 18th among states.
When you create a limited liability company (LLC) in Washington, it’s advisable to hire an LLC formation service to prepare and submit your registration paperwork to the Washington Secretary of State on your behalf, and to act as a liaison between your business and the state. This leaves you with more time to concentrate on your business’s needs. Read my analysis of the best LLC Services in Washington to choose which firm is ideal for your business.
2. How many people are employed by small businesses in Washington?
There are 1.4 million small business employees that account for 50.7% of Washington’s entire payrolled workforce.
Washington’s minimum wage in 2022 is $14.49 per hour, and Washington employers must pay most employees at least the minimum wage for every hour worked. Working hours include opening and closing a business, as well as necessary training and meetings.
Employers can, however, pay some employees less than the state minimum wage, such as minors 14 to 15 years old, who must be paid at least 85% of the minimum salary, and certificated student workers and student learners, who must be paid at least 75% of the minimum wage.
3. Washington small business statistics by industry
The professional, scientific, and technical services industry is the largest single industry in Washington in terms of small business investment, with a total 109,667 firms currently operating in it. There are 89,215 firms in this industry that have no employees, 18,875 with 1–19 employees, and only 1,577 have 20–499 employees.
The mining, quarrying, and oil and gas extraction industry is the smallest sector in Washington, with 333 firms operating in it.
4. Washington small business ownership by ethnicity
The Evergreen State has a population of 7,738,692 residents. White/Caucasian Americans are the largest ethnic group in the state representing 78.5% of the population. They are followed by Hispanic/Latino Americans (13%), Asian Americans (9.6%), Black/African Americans (4.4%), American Indians and Alaska Natives (1.9%), and Native Hawaiians and Other Pacific Islanders (0.8%)
The data below show how small business ownership is distributed among these ethnic groups:
- White/Caucasian — 521,929
- Asian — 58,301
- Hispanic/Latino — 34,170
- Black/African American — 24,364
- American Indian and Alaska Native — 2,589
- Native Hawaiian and Other Pacific Islander — 1,766
5. Washington small business ownership by gender
Women own 234,128 small businesses in Washington. Around 205,000 of them are nonemployer businesses and another 29,128 have employees. Men own 329,461 small businesses in the state, and 253,000 of them have no employees, while 76,461 have employees on payroll.
There are also 46,764 small businesses that are owned by both men and women.
6. Business taxes in Washington
Most LLCs in Washington are considered pass-through tax entities when it comes to income taxes. In other words, the burden for paying federal income taxes is passed through the LLC to the individual LLC members.
Washington is one of just a few states that does not levy a personal or corporate income tax. As a result, most LLCs, including those that may have decided to be taxed as corporations, owe no state income taxes. Furthermore, because Washington does not have a personal income tax, LLC members will normally owe no state tax on revenue earned via a Washington LLC.
Washington, on the other hand, has a so-called business and occupation (B&O) tax. This tax is levied on the gross receipts of the majority of enterprises, including LLCs. The B&O tax rate for a firm is determined by its categorization, which includes retailing, wholesaling, manufacturing, service, and other operations.
It is critical to always file your tax returns on time, otherwise your business may find itself in legal and/or financial difficulty. Hiring a qualified registered agent will significantly reduce your tax filing burdens. To learn how, read my review of the best registered agents in Washington.
7. How COVID-19 affected small businesses in Washington
Based on the percentage of employees in sectors with a high or medium-high degree of exposure to COVID-19, Washington has the 24th greatest economic exposure to COVID-19 of all states in the US.
In Washington, 49% of all employees, or 1,895,981 people, work in industries with a high or medium-high degree of economic exposure to COVID-19. Also, 726,405 employees work in industries with a low or medium-low level of economic exposure to COVID-19, representing 19% of all employees in Washington.
8. Small business financing in Washington
The Community Reinvestment Act (CRA) is a federal statute passed in 1977 to encourage depository banks to address the credit requirements of the communities in which they are established, especially low- and moderate-income areas.
Large banks are required by the Community Reinvestment Act to disclose new small business loans. In 2019, reporting banks gave out $1.8 billion in loans to Washington firms with less than $1 million in revenue. Total reported new lending to firms with loans of $100,000 or less was $2 billion, while total reported new lending to businesses with loans of $1 million or less was $5.2 billion.
9. Washington small business export statistics
According to the Census Bureau’s profile on importing and exporting companies, a total of 12,079 recognized firms exported items worth $55.1 billion from Washington in 2019. Approximately 10,778 (or 89.2%) of the exporters were small businesses that shipped items worth $14.1 billion, accounting for 25.7% of total exports by all recognized businesses.
The Final Word
If you’re looking for a place with strong entrepreneurial energy and a supportive, creative culture, consider the Evergreen State.
The state’s standard of living is relatively high. Washington offers it all, whether you prefer to ski, hike, or swim. It has mountains, deserts, rainforests, and more than 3,000 kilometers of coastline. In addition, the state is home to three national parks: Olympic, North Cascades, and Mount Rainier. With so many options for active individuals, it’s no surprise that Washington is consistently ranked among the top 10 healthiest states in the country.
- CNBC – Top States for Business
- Square Up
- Washington Policy
- Business News Daily
- Washington State Department of Labor and Industries
- Fora Financial
- Tax Foundation
- Census Bureau
- US Small Business Administration