What is the difference between a limited liability company and a sole proprietorship?

In Washington state, two common business formation entities are a limited liability company (LLC) and a sole proprietorship. Although both are popular business models for entrepreneurs, the two differ in several ways. A sole proprietorship is the simplest business model and requires only one person to establish and run the business. This type of business structure carries no legal distinction between the business entity and the individual proprietor. The sole proprietor has complete control, decision-making authority, and financial responsibility over the business. On the other hand, a limited liability company (LLC) provides liability protection for its members. Like a sole proprietorship, an LLC may have one or more members. Unlike a sole proprietorship, the members of an LLC have limited financial responsibility over the business. The LLC provides more protection for owners by shielding their personal assets from any potential liabilities. In summary, the main difference between an LLC and a sole proprietorship is the amount of personal liability for the members. A sole proprietorship gives the single business owner full responsibility for all of the debts, obligations and liabilities of the business, while an LLC offers more protection by limiting liability for the individual members.

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What is the difference between a limited liability company and a sole proprietorship?

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