For anyone who is interested in starting a business in Washington, D.C., it is helpful to have information about the different types of business entities that can be set up.
A limited liability company, also known as an LLC, is an unincorporated association with one or more members. The owners manage and control the business and only their investment is at risk with an LLC, not their personal assets. Owners are taxed on business income.
A for-profit corporation, either an S or C corporation, is organized with the intent of making a profit and it is required to issue stock shares. It is managed by shareholders, directors and officers who have limited personal liability. The partners in a C corporation are taxed on profits personally based on their ownership percentage.
A limited partnership has general and limited partners. General partners are personally liable for the business and exercise control over the business. Limited partners are liable for their business investment and do not have formal control of the business. Partners are taxed on profits personally and on their ownership percentages.
Businesses in Washington, D.C. are allowed to register and use a trade name. However, the name used for the registered entity does not need to be registered as the business’s trade name. After a trade name is registered, it must be renewed every two years.
These are only some examples of business entities available. An attorney can help prospective business owners determine which type applies best to their circumstances and explain the registration process in more detail.