You have an idea, the necessary skills, the right connections, and the plan to make it all happen. You are starting a business, and you are probably both very excited and very stressed. For all the hope and anticipation starting a new business can inspire, it can also cause equal amounts of anxiety and confusion. That’s where business formation lawyers can help.
Almost immediately, you are faced with big, jargon-filled questions that could define the future of your business: Are you forming a partnership? an LLC or a PLLC, C corp or S corp? At the very least, dealing with these difficult legal issues can take the excitement out of the process. At worst, it can lead you down a path to failure if you make even a small mistake. Fortunately, you can focus on developing your business and turn these complex legal issues to one of our business formation lawyers at Landrith & Kulesz, L.L.P.
Types of Business Entities
Forming your business is not usually as simple as calling yourself a business and being done with it. You may have to file formal legal paperwork to legally become a business entity in Texas.
But what kind of business entity do you need? There are several choices in Texas, and we outline the most common ones below.
A C corporation is the typical corporation you think of when you picture big businesses—shareholders, meeting minutes, and the like.
This is the most complicated type of business entity to form, but the potential benefits can be big: Your personal assets are protected from company liabilities absent special circumstances, you can sell shares in the business to raise a lot of money very quickly, and you can easily transfer ownership interests.
Aside from the complicated legal paperwork required, potential drawbacks of forming a C corporation include facing higher taxes than you would on your own, maintaining meeting minutes and detailed financial reports, and upholding stringent shareholder accountability rules.
In an S corporation, you are the sole owner of the business, but the business is organized like a regular corporation. You are the president, director, and lone shareholder. This arrangement is popular with owners of small businesses.
S corps can provide various tax benefits, such as allowing you to avoid Medicare and Social Security taxes on funds you distribute to yourself.
As a shareholder in your S corp, you theoretically face limited liability, meaning you should not be liable for the debts of the S corp. But this limited liability can have gaps in it, leaving you open to liability for negligence and guaranteeing debts of your corporation.
This business entity is a popular choice for individuals who have a low risk of facing liability, as well as little overhead.
Simplicity is the main benefit of becoming a sole proprietor in Texas. You own all of the assets of your business and pay taxes through your personal tax return.
The drawback? As the owner, you are liable for all of the obligations of your business, such as debts.
Limited Liability Companies
A limited liability company (LLC) has similarities to corporations and partnerships.
The “limited liability” part of the name means owners’ liability related to the LLC is limited to the investment they have made in the business.
Owners of an LLC—called members—are taxed directly through a “pass-through” tax arrangement, but if the LLC makes more than a certain amount of money, it may face taxes from the state of Texas, too.
Professional LLCs and Professional Corporations
A professional LLC (PLLC) or professional corporation (PC) can be extremely similar to an LLC or corporation. The difference is simply in who, exactly, can form such a business entity. These business entities are limited to people with professional licenses—attorneys, doctors, accountants, architects, and similar professionals.
Under such an arrangement, you are protected from liability for the negligent actions (malpractice) of other owners, but you may still face liability for your own malpractice.
If you and at least one other person are considering forming a business in the Arlington area, a business formation and startup lawyer from our firm can help you form a partnership.
Partnerships are not taxed. Instead, the tax liability is passed through the partnership and directly to the individual members for their own incomes related to the partnership. But keep in mind that major decisions, such as transferring ownership, will require the approval of all involved partners.
Here are the three kinds of partnerships you may wish to form:
- General partnerships. This is the simplest type of partnership. It allows partners to decide how to divide income and losses among members. You are not protected from the liability your other partners may cause.
- Limited partnerships. In a limited partnership, there is one general partner and at least one limited partner. The general partner can manage the business and is exposed to potential lawsuits related to the business. Limited partners are free from liability unless they engage in management decisions for the business.
- Limited liability partnerships. A limited liability partnership (LLP) protects partners from being sued for the negligence of other partners. You may need to carry liability insurance as part of your LLP formation.
Why Work with Business Formation Lawyers?
Forming your business entity is what makes your business official. You do not want the first step you take as a new business to be on the wrong foot. Qualified business formation lawyers can ensure that everything goes smoothly so you can focus on what matters: getting your new business off the ground.
An experienced business attorney or startup lawyer can provide initial and ongoing legal assistance for your business. We can help file all the paperwork, and we can create and review contracts and other agreements for you. We can handle the following, among other documents:
- Shareholder agreements
- Joint venture agreements
- Partnership agreements
- Employment contracts
- Noncompete agreements
- Corporate bylaws and minutes
- Contracts with independent contractors and vendors
Contact Landrith & Kulesz, L.L.P.
Your business is going to be a big part of your life. You need a legal guide who takes it as seriously as you do. That is what you will get with Arlington business formation lawyers Landrith & Kulesz. Our full-service law firm stands ready to handle all of your business’ legal needs.
For help forming the business you are dreaming of, get in touch with the experienced business attorneys at Landrith & Kulesz, L.L.P. today.