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Business Formation


Options for Forming a New Business in Texas

  • A sole proprietorship (i.e.,doing business in your individual name) 

  • A general partnership or limited partnership 

  • A limited liability partnership (LLP)

  • A limited liability company (LLC)

  • A C- corporation or S-corporation


What are the Differences Between a Partnership, Corporation, and a Limited Liability Company?

There are entire books devoted to the differences between partnerships, corporations, limited liability companies, and other legal entity structures. However, for most businesses and individuals, the primary differences include:

  • Liability–General partners are exposed to personal liability, while limited partners, corporate share holders, and LLC members enjoy limited liability. This means that–assuming the partnership, corporation, or LLC has been formed and managed properly–its owners will generally not be exposed to personal liability for the business’s debts. Tax–By default, partnerships, LLCs, and S-corporations are pass-through entities, meaning that the business’s income gets reported on its owners’ tax returns. In contrast, C-corporations are subject to corporate income tax (in addition to the personal income tax at the share holder level). Which option is the most advantageous will depend upon a number of different factors that are unique to each individual business.

  • Formalities–Generally speaking, partnerships and LLCs are subject to fewer formalities than corporations.

  • Flexibility-LLCs generally offer a greater level of flexibility when it comes to structuring ownership and control.

  • Transferability of Shares–If one of your goals is to build a business you can sell, this should factor into your choice of entity, as well.


Why Should I Hire a Business Law Attorney to Form My New Business Entity?

While there are a number of self-help options available online, it is strongly advisable to hire a business attorney to form your new business entity. There is much more involved in the process than simply filing a form and paying a filing fee, and you will need an experienced attorney who can help you prepare all of the necessary documentation (including a partnership, shareholder, or operating agreement).

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