How to Choose the Right Business Structure When Starting a Business in Texas
How to Choose the Right Business Structure When Starting a Business in Texas
When starting a business, one of the foundational questions for the founder is how to structure the business. The business structure a founder selects can affect taxes, liability, and numerous other issues.
The Texas Secretary of State lists the following types of common business structures:
- Sole proprietorship
- General partnership
- Corporation, S-corp, or C-corp
- Limited liability corporation
- Limited partnership
- Limited liability partnership
Sole proprietorship, for example, is the easiest and most common business structure in the Lone Star State. The downside is there’s no division between owner and business, meaning an owner is fully liable for business debts and other obligations.
At the other end of the spectrum, corporations are the most complex. They also offer the highest level of protection between personal and business. Higher regulatory requirements and compliance, however, make this option a considerable investment in money and time.
Considerations When Selecting a Business Structure
The best business structure depends on the specific circumstances of the founder, the reasons for the business’s creation, and the business’s long-term goals. Some questions to consider:
- What are the pros and cons of each potential business structure?
- In a business’s industry, what are the most commonly used business structures?
- What is the acceptable level of personal liability?
- What are the tax advantages and disadvantages for each of the possible business structures?
- How does the founder want the IRS to tax business profits?
- What is the ownership structure? Is it a single owner or multiple? Will the business have any investors?
- What is the company’s long-term growth plan?
- Will the business have a more formal or informal structure for employees?
- How complex is the business’s structure?
The question isn’t just what’s the best option now. Founders and owners should also consider what’s the best choice for five or ten years in the future.
Owners and founders should also consider what works best for their specific business and situation. An industry may, for example, predominantly use general partnerships, but a specific business would do better under a limited liability partnership.
Hire a Skilled Lawyer Who Knows Texas
If you have questions about which business structure is right for your company and how to create it, the attorneys at Manfred Law can help. Call us at 713-547-5460 or contact us online to schedule your consultation.
