We previously posted a series on estate planning basics. Our next series will focuses on business law. This post provides very basic information on the types of business structures frequently used in the State of Washington. There are complexities within each of these entity structures, which the attorneys at Leos & Gilkerson, PLLC can guide you through. In addition, we can assist you with determining which business entity best suits your needs and how to form and maintain the business entity.
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, fewer legal controls, and fewer taxes. However, the business owner is personally liable for all debts incurred by the business.
A General Partnership is composed of 2 or more persons (usually not a married couple) who agree to contribute money, labor, 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. An attorney should prepare the 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 fully 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.
Limited Liability Partnership (LLP)
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 by professionals, such as accountants and lawyers.
Limited Liability Limited Partnership (LLLP)
A Limited Liability Limited Partnership is a Limited Partnership that chooses to become an LLLP by including a statement to that effect in its certificate of limited partnership. This type of business structure may shield general partners from liability for obligations of the LLLP.
Limited Liability Company (LLC)
A Limited Liability Company (LLC) is formed by 1 or more individuals or entities through a special written agreement. The agreement details the organization of the LLC, including provisions for management, assignability of interests, and distribution of profits and losses. LLCs are permitted to engage in any lawful, for-profit business or activity other than banking or insurance.
A Corporation is a more complex business structure. A corporation has certain rights, privileges, and liabilities beyond those of an individual. Doing business as a corporation may yield tax or financial benefits. Corporations may be formed for profit or nonprofit purposes.
I always love discussing people's new business ideas. If you want to chat about your new business and forming an entity, feel free to email or call me 425-885-4066.
Disclaimer: The information in this blog post (“post”) is provided for general informational purposes only, and should not be construed as legal advice from Leos & Gilkerson, PLLC or the individual author, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting on the basis of any information included in, or accessible through, this Post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a licensed lawyer.