Business Formation for Promising New Enterprises
Forming a new business is an exciting endeavor. There are many strategic decisions to make during the business formation process. Legal considerations factor into many of those decisions.
At Oldham Law, PLLC, founder and business attorney Harrison Oldham can help you start your business on the right foot. From inception to ongoing operations to disputes and dissolution, he handles the many varied legal concerns that can arise during the life of a business.
What Types of Legal Entities Can Businesses Choose From?
A major component of business formation is selecting the right type of entity for your enterprise. In Texas, those entities include:
- Sole proprietorship – the business doesn’t have a separate legal existence apart from its owner
- Limited liability partnership (LLP) – the business is a separate legal entity owned by partners
- Limited liability company (LLC) – the business is owned by members
- S corporation – the business is owned by a small number of shareholders (also called a closely held corporation)
- C corporation – the business has the potential to be held by a larger number of shareholders, and shares may be publicly traded
Any type of business entity may also file an assumed name (DBA) registration with the Texas Secretary of State to publicly document the name that it does business under.
What Factors Go Into Choosing a Business Entity?
There are multiple considerations to take into account when selecting a business entity, including:
- Tax advantages: With some business structures, the owners are taxed directly, meaning the business income is treated as their personal income for tax purposes. With others (notably, C corporations), the business pays its own taxes as a separate entity.
- Protection from personal liability: Business entities such as LLPs, LLCs, and corporations are treated as separate entities for purposes of legal liability. Their owners generally aren’t personally liable for business torts or other liabilities.
- Ownership and governance structure: Each type of business entity must have certain structures in place for ownership and governance. With some entities, ownership can be transferred more easily than others.
- Ease of formation and maintenance: Some entities are more complicated to get off the ground than others. Additionally, entities like corporations require more ongoing effort to maintain corporate formalities.
The lawyer at Oldham Law, PLLC, can help you weigh the advantages and disadvantages of each entity type for your particular business.
What Are the Core Governing Documents for a New Business?
Each type of business entity requires specific governing documents such as:
- Articles of formation or organization
- Operating agreements
- Partnership agreements
- Shareholders’ agreements
- Corporate minutes
Without having the right governance structure in place and maintaining that structure in accordance with Texas law, business owners could lose their legal protection from personal liability.
Contact a Seasoned Business Formation Attorney
Located in the Dallas-Fort Worth area, Oldham Law, PLLC, serves business clients throughout Texas. Learn more by contacting the firm online or calling 214-838-8400. The firm offers complimentary initial consultations.