WA State Licensing: Compare business structures

Compare business structures

To find the business structure that works best for you, you may want to use the tables below to compare:

To compare this information in a single table, see Washington business and organization structure considerations.

This information is for reference only. For detailed considerations, please contact your trusted advisor.

Filing requirements
Business structure Required to file or register with the Washington Secretary of State?
Sole proprietor No
General partnership No
Limited Liability Company (LLC) Yes
Corporation Yes
Limited Partnership (LP) Yes
Limited Liability Partnership (LLP) Yes

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Difficulty of forming a business
Business structure Formation difficulty
Sole proprietor Low
General partnership Low
Limited Liability Company (LLC) Medium
Corporation Medium/high
Limited Partnership (LP) Low
Limited Liability Partnership (LLP) Medium

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Who has liability
Business structure Liability
Sole proprietor Sole proprietor has unlimited liability.
General partnership Partners have unlimited liability.
Limited Liability Company (LLC) Members aren’t typically liable for the debts of the LLC.
Corporation Shareholders aren’t typically responsible for the debts of the corporation.
Limited Partnership (LP) At least one general partner has unlimited liability.
Limited Liability Partnership (LLP) Partners aren’t typically liable for the debt of the LLP.

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Legal and operational requirements
Business structure Requirements
Sole proprietor Relatively few legal requirements.
General partnership Relatively few legal requirements.
Limited Liability Company (LLC) Some formal requirements, but less formal than corporations.
Corporation Board of directors, annual meetings, and annual reporting are required.
Limited Partnership (LP) Some formal requirements, but less formal than corporations.
Limited Liability Partnership (LLP) Some formal requirements, but less formal than corporations.

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Who manages the business
Business structure Management
Sole proprietor Sole proprietor has full control of management and operations.
General partnership Typically each partner has an equal voice unless otherwise arranged.
Limited Liability Company (LLC) Members have an operating agreement that outlines management.
Corporation Managed by the directors, who are elected by the shareholders.
Limited Partnership (LP) Limited partners are excluded from management unless they serve on the board of directors.
Limited Liability Partnership (LLP) All partners have the right to manage the business directly.

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How federal taxes are determined
Business structure Federal taxes
Sole proprietor Not a taxable entity. The sole proprietor pays all taxes.
General partnership Not a taxable entity. Each partner pays taxes on his or her share of income, and can deduct losses against other sources of income.
Limited Liability Company (LLC) Depending on structure, there is no tax at the entity level. Income/loss is passed through to members.
Corporation Taxed at the entity level. If dividends are distributed to shareholders, dividends are also taxed at the individual level.
Limited Partnership (LP) Files taxes as a separate entity, must meet certain criteria to avoid being taxed as a corporation.
Limited Liability Partnership (LLP) Taxed as a separate entity. Must meet certain criteria to avoid being taxed as a corporation.

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Washington excise tax and liability (Washington Department of Revenue)
Business structure State taxes and liability
Sole proprietor Taxes based on business entity income. Sole proprietor has unlimited liability.
General partnership Taxes based on business entity income. General partners have unlimited liability.
Limited Liability Company (LLC) Taxes based on business entity income. Responsible parties may have liability for trust fund taxes.
Corporation Taxes based on business entity income. Responsible parties may have liability for trust fund taxes.
Limited Partnership (LP) Taxes based on business entity income. General partners have unlimited liability. Limited partners may have liability up to the amount of their investment.
Limited Liability Partnership (LLP) Taxes based on business entity income. General partners have unlimited liability. Limited partners may have liability up to the amount of their investment.

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