Texas has many options for those seeking to start a business here. Some things you may want to consider when forming your business are the levels of liability protection and the tax implications of the type of entity you choose. Some of the most common types of business entities in Texas are listed below:
Sole Proprietorship: The most common and the simplest form of business is the Sole Proprietorship. In a sole proprietorship, a single individual engages in a business activity without necessity of formal organization. It provides no liability protection, but is quick, easy, and inexpensive set up. Taxes are passed through to the individual to pay.
Partnership: A Partnership is an association of two or more persons to carry on as co-owners of a business for profit, whether they intend to form a partnership or not. A partnership does not have to be in writing, but a partner is jointly and severally liable for the actions and wrongdoings of the partnership.
LLC: A Limited Liability Company (LLC) provides for flexible management – it can be structured like a corporation or a partnership, but generally managers run the LLC. There is no liability for members of an LLC other than the wrongdoer. Profits and Losses are generally split in proportion to the capital contributions.
Corporation: A Corporation is considered a separate legal person- it can sue or be sued, hold property, pay income taxes. Generally, shareholders, officers and directors are not liable for debts or wrongdoings of the corporation. A corporation issubject to double taxation, however, unless you make a Subchapter S election with the IRS. These elections are available in limited circumstances to privately – held companies with under 100 employees.
Partnership: A Partnership is an association of two or more persons to carry on as co-owners of a business for profit, whether they intend to form a partnership or not. A partnership does not have to be in writing, but a partner is jointly and severally liable for the actions and wrongdoings of the partnership.
LLC: A Limited Liability Company (LLC) provides for flexible management – it can be structured like a corporation or a partnership, but generally managers run the LLC. There is no liability for members of an LLC other than the wrongdoer. Profits and Losses are generally split in proportion to the capital contributions.
Corporation: A Corporation is considered a separate legal person- it can sue or be sued, hold property, pay income taxes. Generally, shareholders, officers and directors are not liable for debts or wrongdoings of the corporation. A corporation issubject to double taxation, however, unless you make a Subchapter S election with the IRS. These elections are available in limited circumstances to privately – held companies with under 100 employees.
If you or someone you know is ready to set up a small business or has general business questions, contact us today.