You may operate your business under any one of several
organizational structures. Each type of structure has certain advantages and
disadvantages that should be considered. You should contact an attorney,
accountant, financial advisor, banker, or other business or legal advisor to
determine which form is most suitable for you.
A Sole Proprietorship is one individual or married couple in
business alone. Sole proprietorships are the most common form of business
structure. This type of business is simple to form and operate, and may enjoy
greater flexibility of management and fewer legal controls. However, the
business owner is personally liable for all debts incurred by the business.
A General Partnership is composed of two or more persons
(usually not a married couple) who agree to contribute money, labor, and/or skill
to a business. Each partner shares the profits, losses, and management of the
business, and each partner is personally and equally liable for debts of the
partnership. Formal terms of the partnership are usually contained in a written
partnership agreement.
A Limited Partnership is composed of one or more general
partners and one or more limited partners. The general partners manage the
business and share full in its profits and losses. Limited partners share in the
profits of the business, but their losses are limited to the extent of their
investment. Limited partners are usually not involved in the day-to-day
operations of the business.
A Limited Liability Partnership (LLP) is similar to a General
Partnership except that normally a partner does not have personal liability for
the negligence of another partner. This business structure is used most commonly
by professionals such as accountants and lawyers.
A Corporation is a more complex business structure. As a
chartered legal entity, a corporation has certain rights, privileges, and
liabilities beyond those of an individual. Doing business as a corporation may
yield tax or financial benefits, but these can be offset by other
considerations, such as increased licensing fees or decreased personal control.
Corporations may be formed for profit or nonprofit purposes.
The Limited Liability Company (LLC) and the LLP are the newest forms of business structure in
Washington. An LLC or LLP is formed by one or more individuals or entities
through a special written agreement. The agreement details the organization of
the LLC or LLP, including: provisions for management, assignability of
interests, and distribution of profits or losses. Limited liability companies
and limited liability partnerships are permitted to engage in any lawful, for
profit business or activity other than banking or insurance.