What type of business entity should I choose?
When deciding the type of business entity to choose, there are several factors to consider. In Washington State, some of the most popular business entities include: Sole Proprietorship, Partnership, Corporation, Limited Liability Company (LLC), and Non-Profit Corporation. A Sole Proprietorship is the most basic type of business and is easy to set up with minimal paperwork and costs. However, this type of entity does not provide any personal liability protection. A Partnership is similar to a Sole Proprietorship but two or more people co-own the business. The partners are jointly and severally liable and personally responsible for the debts and obligations of the business. A Corporation is treated as an independent legal entity and provides its owners with limited liability protection. Additionally, a corporation may be taxed differently than other types of entities. Additionally, Corporations are required to observe formalities including holding annual directors and shareholder meetings. A Limited Liability Company is a hybrid entity that combines the limited liability protection of a corporation with the tax advantages and flexibility of a partnership. An LLC is relatively easy to set up and maintain. A Nonprofit Corporation is a type of corporation organized for charitable, educational, scientific, religious, or literary purposes. A nonprofit corporation may be exempt from taxes as long as it meets certain requirements. Additionally, like a corporation, a nonprofit is an independent legal entity and owners have limited liability protection. Overall, the type of business entity you choose should depend on your specific needs. It is best to consult with an attorney to understand the legal implications of each business entity and the best option for you.
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