Starting a business is an exciting endeavor. But it can also be confusing. Where do you start? What type of business should you form? What are the advantages and disadvantages of each type of business structure? At The Law Offices of Abigail Foreman our goal is to assist anyone in Texas who wishes to start a small business.
Types of Business Entities:
- Corporations The majority of large companies are corporations. Corporations have limited liability, meaning that shareholders can lose their investment but not their personal assets. If the industry you wish to start a business in has a high level of risk and liability, you should consider setting up a corporation.
- Partnerships A partnership can be used by two or more individuals who wish to carry on a business for profit. Unlike a corporation, in a partnership each partner is liable for the debts and legal responsibilities of the partnership. And each partner is also jointly and severally liable for the actions of the other partner. Partnerships have concerns – see below.
- Limited partnerships A limited partnership is similar to a general partnership. The difference is there are two types of partners in a limited partnership: general partners and limited partners. Limited partners have no responsibility in the management of the partnership and are only liable for their personal capital investment. Moreover a limited partner is not liable for the debts of the partnership. If a limited partnership becomes insolvent, creditors can only look to the partnership and the general partner for payment of their debts.Every limited partnership must have a general partner who remains jointly and severally liable for the debts of the partnership. In exchange for accepting personal liability, the general partner often has the right to manage the partnership and enter into contracts on behalf of the partnership.
- Limited liability companies Limited liability companies (LLCs) combine the traits of corporations and partnerships. This type of business structure enjoys the limited liability of a corporation and the eligibility for the pass-through taxation feature of a partnership. LLCs may also select any form of profit distribution.In any economic climate, aspiring business owners face many challenges. Prior to starting your company, you should consult with a knowledgeable Texas business law attorney to find out which business structure is right for you.