Types of business structures

Sole Proprietorship

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 ownership is simple to form and operate, and may enjoy greater flexibility of management, less legal regulation, and fewer taxes. However, the business owner is personally liable for all debts incurred by the business.

General Partnership

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.

Limited Partnership

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. Filing with the Washington Secretary of State is required.

Note: Beginning in January 2010, a Limited Partnership may opt to become a Limited Liability Limited Partnership by including a statement to that effect in its certificate of limited partnership. Status as a limited liability partnership provides general partners with a shield from liability for obligations of the limited liability limited partnership.

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 professional such as accountants and lawyers. Filing with the Washington Secretary of State is required.

Corporation

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, but these can be offset by other considerations, such as increased licensing fees or decreased personal control. Corporations may be formed for profit or nonprofit purposes. Filing with the Washington Secretary of State is required.

Nonprofit Corporation

A Nonprofit Corporation is a legal entity and is typically run to further an ideal or goal rather than in the interests of profit. Many nonprofits serve the public interest, but some engage in private sector activities. If your nonprofit organization is, or plans to, raise funds from the public, it may also be required to register with the Charities Program of the Washington Secretary of State. Charitable activities may require additional registration. Contact the Office of the Secretary of State for more information.

Limited Liability Company (LLC)

A Limited Liability Company (LLC) is composed of one or more individuals or entities through a special written agreement. The agreement includes: provisions for management, ability to assign interests, and distribution of profits and losses. Limited liability companies are permitted to engage in any lawful, for-profit business or activity other than banking or insurance. Filing with the Washington Secretary of State is required.

Trust

A Trust is a legal relationship in which one person, the trustee, holds the title to property (the trust estate or trust property) for the benefit of another person, the beneficiary.

Massachusetts Trust

A Massachusetts Trust is an unincorporated business with the property being held and managed by the trustees for the shareholders. The trustees are considered employees since they work for the trust. Filing with the Washington Secretary of State is required.