What type of companies are web design?

I am looking at starting a web design firm with some friends and want to follow all the legal procedures. Are they sole proprietorships or corporations? Do I need a business license? What paperwork and other legal things do I need to do? I am totally confused as to where to beginning finding out the step by step process to making my business legal and fully professional and recognized. Any thoughts/opinions/comments in detail would be greatly appreciated. Once again I want to create a web design firm based in Seattle that does business both locally and nationally, and will have employees. Thanks!

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