What are Washington State Business Structures?
Businesses in Washington State can operate under various business structure types. Each structure has advantages and disadvantages that should be considered. The descriptions of several business structure types below are provided to assist applicants and are not intended to be legal definitions with the force of law. You should contact an attorney, accountant, financial advisor, banker, or other business or legal advisors to determine which structure is most suitable for your business or organization.
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 business is simple to form and operate and may enjoy greater flexibility of management and fewer legal controls. However, the business owner is personally liable for all debts incurred by the business.
*Our office does not file origination documents for this type of business. Please contact the Department or Revenue for questions on how to register. Our office is also unable to pick up UBI numbers associated with a Sole Proprietorship changing their business structure.
A General Partnership is composed of two or more persons (usually not a married couple) who agree to contribute money, labor, and/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 within a written partnership agreement.
*Our office does not file origination documents for this type of business. Please contact the Department or Revenue for questions on how to register.
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. Note: 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 limited partnership provides general partners with a shield from liability for obligations of the limited liability limited partnership.
A Limited Liability Partnership* is like 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 often by professionals such as accountants and lawyers.
The Limited Liability Company (LLC)* is formed by one or more individuals or entities through a special written agreement. The agreement details the organization of the LLC, including provisions for management, assignability of interests, and distribution of profits or losses. Limited liability companies are permitted to engage in any lawful, for-profit business or activity other than banking or insurance. Doing business as an LLC may yield tax or financial benefits.
A Corporation* is a legal entity. 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 decreased personal control. Corporations may be formed for profit or nonprofit purposes.
A Nonprofit Corporation* is a legal entity and is typically organized to further some sort of ideal or goal, rather than in the interests of profit. Many nonprofits serve the public interest, but some do engage in private sector activities. If your nonprofit organization is currently or plans to fundraise from the public, it may also be required to register with the OSOS Charities Program.
A Nonprofit Miscellaneous & Mutual Corporation* is organized under RCW 24.06 as a nonprofit organization that serves the mutual benefit of its members and is established under the Nonprofit Miscellaneous and Mutual Corporation Act. This structure differs from public-benefit and religious corporations as it is not formed to benefit the general public. It includes organizations such as labor unions, cooperative organizations, banks and insurance organizations, social clubs, fraternal societies, and service organizations.
Items marked with * must register with the Secretary of State, Division of Corporations and Charities.