Deciding on a Business Structure May be the Most Important Decision You Make
If you're in the process of starting a business, you obviously have a lot to think about as you move towards officially opening your doors. You're thinking about money, marketing, sales, product development, infrastructure and countless other things. However, you also need to make perhaps the most important decision that goes along with getting a business started - choosing the proper business structure. Below are a few examples of different business structures and their advantages.
Forming an LLC in Texas - What You Need to Know
Forming an LLC in Texas is a relatively simple process, but there are facts you need to understand before arbitrarily making a decision. "LLC" stands for "Limited Liability Company," and that moniker is very appropriate for the biggest advantage of forming an LLC in Texas - you are shielded from personal liability if anything ever goes wrong.
However, there are disadvantages as well when forming an LLC in Texas. For instance, an LLC cannot simply exist forever. Certain events could automatically dissolve the LLC, and you also need to keep strict records of all of your dealings.
Forming an LLP in Texas - A More Exotic Choice
Forming an LLP in Texas also carries significant advantages. First among them is that you own the percentage of the company that you contributed initially. For instance, if you contributed 75% of the initial total investment, you own ¾ of the company. You also have direct access to the revenue.
However, there are disadvantages to forming an LLP in Texas. The most prevalent is that you have to maintain a litany of records and adhere to several complicated technicalities when running an LLP.
Forming an S Corp in Texas - Things to Consider
Forming an S Corp in Texas may seem like an extremely complicated choice, but after the initial paperwork, forming an S Corp in Texas has several distinct advantages. For instance, forming an S Corp in Texas allows you to pass any losses from the business onto your personal tax return. You also avoid being double-taxed as you would be in a "traditional" corporation.
However, you also need to keep the disadvantages of forming an S Corp in Texas in mind. There are strict requirements involved, including the fact that every shareholder needs to be a US citizen. Your ability to write off business losses cannot exceed your ownership basis in the company.
Overall, you have a lot to think about when starting a business, but deciding on a corporate structure is a critical decision. Contact Texas Legal Entities today to get the guidance you need in making your decision.
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