Business Entity Regulations

Business Entity Regulations

Starting a business is exciting and challenging. A big part that plays into the success or failure of a business is whether or not the business fulfilled the obligations to the government. When starting a business a person needs to decide on their business structure.

There are five different business formation codes that a person may choose from when starting a business.

Sole Proprietorship - Is a business for one individual or married couple. Sole Proprietorships are the most common form of business structure. This is a simple business to form or operate and the owner(s) can enjoy greater flexibility on management, legal controls, and fewer taxes. The business owner is personally liable for all debts incurred by the business because it is a Sole Proprietorship.

General Partnership - Is a business made up by two or more people (usually not married), who all agree to contribute money, labor, and skill to the business. Each partner shares the profits, losses, and management duties. Each partner is also liable for all debts of the partnership. Formal terms that the partners agree upon are usually written in the partnership agreement.

Limited Partnership - Is a business made up of one or more general partners and one or more limited partners. The general partners manage the business and share fully in the 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 not usually involved in the day-to-day operations of the business. When beginning a business like this in Washington the owners must file a Certificate of Limited Partnership with the Corporate Division of the Office of the Secretary of State.

Corporation - Is a complex business structure. Corporations are chartered legal entities and they have certain rights, privileges, and liabilities beyond those of an individual. Doing business as a corporation may give tax or financial benefits, but these can be offset by other fees and considerations.

Limited Liability Company or Limited Liability Partnership - Are the newest forms of business structures in Washington. These types of businesses are formed by one or more individuals or entities through a special written agreement. This type of business is allowed to engage in any lawful for profit business or