One of the first steps in opening a new business is forming the legal entity that will be doing business - a partnership, a limited partnership, an LLC, or a corporation.

For many people, starting a small business is living out a dream — to become an entrepreneur. To become one's own boss. Starting a small business is an admirable goal. However, you must act carefully, especially since it often requires a very significant investment of resources. It is important to take into consideration both the many financial issues and the legal issues. Starting a business on the right legal footing could be critical to its future.

If you are starting a small business in Washington or Idaho, we can help. You need to address many legal issues that face start-up businesses. We can advise you on your new business's legal organization. We can help you by preparing contracts and agreements so that your transactions go smoothly.

One of the first steps to opening a business is forming the legal entity that will be doing business. The best type of business organization for your company will depend on your goals and circumstances. Many businesses start as sole proprietorships or general partnerships. Sole proprietorships are the most common type of small business. Sole proprietorships and general partnerships do not have to register with the state Secretary of State. Neither are formal business entities. They are not taxable for federal purposes; the proprietor or partner simply reflects the business’s income or loss on their personal income tax returns. While relatively simple and flexible, sole proprietorships and general partnerships have many disadvantages, chief among them that the sole proprietors and partners are personally liable for any debts or any legal liability that their business might face.

Small businesses may create a more formal structure to conduct business. These business organizations have advantages over sole proprietorships and general partnerships. By creating a formal business organization, the owner can still reflect the business income and losses on their personal tax return but can generally be protected from personal responsibility for the business’s debts and other liabilities. A formal structure requires certain filings with the Secretary of State, which we can help you with.

Some of the different types of business structures that you may consider are:

LIMITED PARTNERSHIP (LP): In a limited partnership, there are two different classes of partners: General partners and limited partners. Like in a general partnership, general partners have unlimited liability for the company's debts. However, there are also limited partners, who are not liable. Limited partners have less control of the company than general partners. The circumstances in which a limited partnership is the best option are narrow but may occur if one or more partners is putting in significant capital but not taking a role in managing the company.

LIMITED LIABILITY PARTNERSHIP (LLP): In an LLP, the partners share management of the company, with all partners on the same level, unlike the tiers in an LP. However, the partners will not be personally liable for any debt, under most circumstances.

LLPs tend to be attractive options for firms of professionals, like law firms, architects, and accounting firms.

LIMITED LIABILITY COMPANY (LLC): Despite its name, in Washington and Idaho, an LLC can actually have just one owner/member. An LLC is governed by an operating agreement that sets out the specific agreement of the members and establishes procedures for making future business decisions. We can help you form your LLC by filing the appropriate documents with the state government and drafting the operating agreement that embodies the agreement of the members with one another.

CORPORATION: Corporations with a small number of shareholders, or “closely held corporations” are sometimes a good option for beginning a small business. We can advise you if your particular circumstances merit forming a closely held corporation.

One of the key elements of preparation for opening your business is being ready to actually conduct transactions. There are many agreements you will need to make and will need to make many more throughout the course of your business: agreements with vendors, suppliers, landlords, clients, customers, and others. We can advise and negotiate on many important contracts to help make sure you're getting off on the right foot. We can also help you draft agreements for use throughout the course of business.

Opening your own business is an exciting time, but there's significant risk involved. Having a lawyer on your side can help you understand the risks and make informed decisions. We have over 25 years' experience in assisting entrepreneurs opening their own businesses. Call us today at 253.858.5434 to set up a consultation.