1850 M Street NW,, Suite 840, Washington, District of Columbia 20036

A Look at Different Types Of Business Entities


The first step in starting your business is to consult with a business-law attorney to for help in selecting an appropriate business entity. Read on to find out more about different business entities, including a sole proprietorship, a partnership, a corporation, and a limited liability company.


Sole Proprietorship

Business EntitiesA sole proprietorship is a business organization in which only one person is liable for the business’s debts and obligations. That individual
will also be entitled to all the business’s profits and will maintain complete control over the management of the business. A sole proprietorship is like a “default” entity because it does not require taking any formal action.


A partnership is made up of one or more partners who are jointly liable for the business’s debts and obligations. Profits are divided in
accordance with their partnership agreement. A partnership may also include limited partners who are not involved in managing the business but who share in the profits. A limited liability partnership is a special partnership entity in which the general partners limit their liability for the debts and obligations of the partnership. In order to form a limited partnership or limited liability partnership in D.C., you must register with the Department of Consumer and Regulatory Affairs. .


A corporation shields the owners’ personal assets from business liability. A corporation is legally authorized to act in its own name through its officers and directors and can make contracts and pay taxes. A corporation issues stock to its owners, who are entitled to dividends the company pays as well as its assets if it is liquidated. Ownership is transferred through the sale of stock, and ownership may change without affecting the day-to-day management of the company. Corporations must also be registered with the Department of Consumer and Regulatory Affairs.

Limited Liability Company

A limited liability company is a popular entity type that combines advantages of the corporation and partnership. Like a partnership, an LLC is a “pass-through” entity, meaning that the profits and losses are attributed to the owners – or “members” – for tax purposes. And like a corporation, the members’ personal assets are shielded from the LLC’s creditors. An LLC also provides for flexible management arrangements, which are embodied in an operating agreement. You should consult a business-law attorney for advice on forming an LLC and drafting an operating agreement.

General information on registering your business can be found at the D.C. Department of Consumer and Regulatory Affairs, Maryland Department of Assessments and Taxation, and Virginia
State Corporation Commission.

Blog disclaimer: This site is for informational purposes only – it is not legal advice. Nothing on this site establishes an attorney-client relationship with any reader, nor is it guaranteed to be current, accurate, or complete. If you need legal advice, consult an attorney.


Review Our Firm