What entity should I form for my new business?
Forming the right type of business entity is important for all new businesses. In the state of Washington, you have the option to form a Limited Liability Company (LLC), a corporation (C or S), or a partnership. When deciding which entity to form, you should consider the type of business, who is involved in the company, how it will be taxed, how the company is managed, and other factors. A Limited Liability Company (LLC) is a great option for many business owners because it offers limited liability protection for the members of the LLC. It is also fairly simple to form and less expensive than other entities. An LLC gives the business owners the flexibility to decide how to be taxed (as either a partnership or a corporation). A corporation (C or S) is a separate legal entity from its owners. A C Corporation is subject to double taxation, meaning the corporation itself pays taxes on its profits, and then shareholders pay taxes on dividends they receive. An S Corporation is similar to an LLC; however, profits and losses are passed through to owners, who report it on their individual tax returns. Lastly, a partnership is a legal structure between two or more people that allows them to jointly own and operate a business. Both general and limited partnerships are available in Washington, and tax filings vary based on the type of partnership. In conclusion, forming the right type of business entity in Washington will depend on the type of business, its owners, and other factors. Consider all of these factors to decide which entity is best for you.
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