What entity should I form for my new business?
Choosing an entity type for a new business in Texas depends on the needs of the business and the goals of the owner(s). There are four main types of business entities available in Texas: sole proprietorship, partnership, corporation, and limited liability company (LLC). For someone interested in setting up a business on their own, a sole proprietorship may be the simplest and most straightforward option. This type of business has no legal distinction between the business and the individual, and allows the individual to keep all profits from the business. However, the sole proprietor is also personally responsible for all debts and liabilities of the business. If more than one person is interested in owning the business, a partnership may be a good choice. This type of entity runs similarly to sole proprietorships, but allows multiple people to share in the ownership and profits of the business. However, the partners are also responsible for all debts and liabilities of the business. For businesses looking to limit the personal liability of the owners, a corporation or LLC may be the best option. Corporations are separate legal entities that can raise capital by selling shares of stock, and the owners (shareholders) are not personally responsible for the debts and liabilities of the business. LLCs also provide protection for the owners, but don’t offer the same ability to sell shares as corporations. Choosing the proper entity type for a new business in Texas can be a complex decision, so it’s important to do some research and seek professional advice to determine which entity is the best fit.
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