04. Business Formation
Choosing the Right Entity
There are many things to consider when you are starting up a new business. Your choice of the entity to be used for the new business can be one of the most important initial decisions you make. A sample of the choices for your new business are:
Limited Partnerships (LP)
Limited Liability Companies (LLC)
Professional Associations and Corporations
Business Succession Agreements
Stock Redemption Agreements
Contracts under Business Agreements
Each form of entity listed above have different formation requirements that need to be followed. For example, corporations and limited liability companies must file organizing documents with the Corporations Section of the Office of the Secretary of State. Depending on your business form, you may also need to register with the other states where you intend to conduct business. Limited partnerships, limited liability companies, and corporations are typically subject to this requirement.
Also each of the business entity forms provide certain benefits for the owners, such as taxing benefits or liability protection. For example, the income you earn in a sole proprietorship, general partnerships, and some limited liability companies are taxed only at the personal level. Corporations do not offer that pass-through structure; they pay federal income tax at both the corporate and personal level. Yet corporations offer the most protection against personal liability for any business debts or legal obligations.
Comprehensive planning is critical to the success of a new business venture. That process must include choosing a business form. We recommend that you include an Attorney early in these discussions because each business form has its own financial, tax, personal liability, and legal obligations. We take the time to really listen to our clients and learn about their business goals. That way, we can best help you weigh the pros and cons of each form, while guiding you through any legal requirements of maintaining your business status in Texas.
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There are many different types of business formations and deciding which business form best suits yours and your business needs can be difficult. Allow us to assist you in choosing the right type of business and guide you through all the legal requirements for establishing and maintaining your business.