When starting your own business, it is important to understand the different types of business structures that are available so you can build your business to suit your needs. Most will default to a Sole Proprietorship as this is simple to form and operate; however, one needs to keep in mind that as the business owner, you are personally liable for all debts incurred by the business. Below is a basic overview of the different types of business structures taken from the State of Washington Business Licensing Service:
A Sole Proprietorship is one individual or married couple in business alone. This type of business is simple to form and operate, may enjoy greater flexibility of management, fewer legal controls, and fewer taxes. However, the business owner is personally liable for all debts incurred by the business.
A General Partnership has two or more persons 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.
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 are not usually involved in the day-to-day operations of the business, they share in the profits of the business, but their losses are limited to the extent of their investment.
A Limited Liability Partnership (LLP) is similar to a General Partnership except that normally a partner doesn’t have a personal liability for the negligence of another partner.
A Limited Liability Limited Partnership (LLLP) is a LP that chooses to become an LLLP by including a statement to that effect in its certificate of limited partnership. This type of business structure may shield general partners from liability obligations of the LLLP.
A Corporation is a more complex structure where it 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.
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.
A Limited Liability Company (LLC) is formed by one or more individuals or entities through a special written agreement that details the organization of the LLC, including provisions for management, assignability of interests, and distribution of profits and losses.
A Joint Venture is formed for a limited length of time to carry out a business transaction or operation.
A Tenants in Common allows two or more people to occupy the same business while retaining separate identities in regard to assets or liabilities resulting from business activities.
An Association is an organized group of people who share a common interest, activity, or purpose.
Be sure you understand what each structure entails and choose the one that is appropriate for your business needs.
What has been your experience with operating as a photography business in the State of Washington?