What is a Limited Liability Company?
A limited liability company, or LLC, is one of many different types of business entities that entrepreneurs can form in the state of Washington. The other forms of business entity Washington entrepreneurs frequently choose are sole proprietorships and corporations. While each business entity has its own strengths and weaknesses, LLCs are generally considered the best business entity for new and small businesses because they offer liability protection, flexible taxation options, and they do not have strict corporate governance requirements.
What is the difference between an LLC and Sole Proprietorship?
The main difference between an LLC and a sole proprietorship is that LLCs offer liability and debt protection, while sole proprietorships do not. For example, if you own a sole proprietorship and your business is sued for any reason, then you could be held personally liable for the damages caused by your business. However, if you own an LLC and you are sued, the LLC will be generally responsible for the damages and you will be personally protected. An LLCs do not protect its owners from acts of negligence by the owners.
What is the difference between an LLC and a Corporation?
The main difference between LLCs and corporations is that corporations are more difficult to manage. For example, a corporation must be managed by a board of directors and hold annual shareholder meetings. Whereas an LLC can be managed by its owners and does not have any formal operating requirements. LLCs also have tax advantages over corporations for small businesses. A corporation is taxed at the business entity level, which means that the corporation is taxed and the owner is taxed. LLCs, on the other hand, are only taxed at the owner level by default. This means that an LLC’s gains and losses pass directly to the owner, allowing the owner to only be taxed once for the business.
What kind of business can be an LLC?
Under Washington law, a business formed for any lawful purpose can be an LLC.
Do I need an Operating Agreement, Articles of Incorporation, or any other documents to form an LLC?
The short answer is no. However, if your LLC will have more than one owner, Virgo Law recommends that you work with a business law firm, like Virgo Law, to ensure that the agreement between you and your partner or partners is memorialized.
Can I change my business entity?
Yes. You can change your business entity at anytime as your business grows. Virgo Law recommends that you work with a business law firm, like Virgo Law, if you decide to change your business entity.
How do I form an LLC?
Virgo Law recommends speaking with a business law firm, like Virgo Law, before forming your business entity to make sure you are making the right choice. The Washington Secretary of State considers forming an LLC to be medium difficulty because of the multiple steps involved in forming the LLC. However, if you would like to form your LLC by yourself, Virgo Law has prepared an LLC Formation Guide that you can purchase that will walk you through all of the steps necessary to form your LLC.
Things to know before purchasing Virgo Law’s LLC Formation Guide:
- Forming an LLC in Washington will cost you approximately $400 in filing fees depending on the nature and location of your business.
- This guide is primarily designed for solo entrepreneurs. If you have a partner or partners, you should consider working with Virgo Law to develop an operating agreement for your LLC.