Before starting a business, it’s important to determine the organizational structure. The structure you choose will not only affect your overall business strategy, but will also dictate taxes and other liabilities. There are numerous financial implications to consider with each business structure; therefore it is recommended that you consult with an experienced business attorney in order to determine the best structure for your business. Read more about Richard Alexander to learn more.
In Texas, there are four main business structures to choose from:
- Sole Proprietorship: A sole proprietorship means that a business is operated by a single individual and that he or she owns all the business assets. This is the most common small business type. The advantage of a sole proprietorship is that it is the simplest to establish and does not require a separate tax return. The disadvantage, however, is that the life of the business is directly tied to the owner. Also, there is no financial distinction made between business and personal debts.
- Partnership: A general partnership is when two or more people join together to run a business for profit. Most partnerships operate according to a written partnership agreement which lists the terms of the partnership. Unlike a sole proprietorship, a separate business entity exists, however, business debts may still be pursued from each general partner’s personal assets. In Texas, Partnerships can be General, Limited, or Registered Limited Liability Partnerships. Each partnership type allows for different divisions of assets and liability for debts and obligations.
- Corporation: A corporation is formed when two or more people, partnerships, or entities join together to create a separate business entity. Unlike sole proprietorship’s or partnerships, a corporation has its own legal identity. This separate identity protects the owner’s assets from the business’s debts and liabilities. The taxes for a corporation are determined by the type formed. In Texas, a corporation can be subchapter C or S each having its own benefits and tax requirements.
- Limited Liability Company (LLC): A LLC is an unincorporated business entity. It shares some aspects of limited partnerships or certain corporation types, yet it is much more flexible than other business types. There are numerous benefits to the flexibility of an LLC which can allow for positive tax treatments and a variety of structures. It is vital to work with an experienced business attorney to maximize the benefits of the creation of an LLC.
Alexander Law Firm has experienced business lawyers who have worked with a variety of business structures. Contact us today and let us help you choose the best organizational structure for your business.