Starting any kind of business is a very important decision and you will need to determine what kind of business organization will work best for you.  The kind of business you want to have, the number of employees (if any) you plan on hiring, whether your business will be a profitable one or a nonprofit organization, the type of insurance plan you need, liability issues, whether you have personal debt, how your business will be taxed, and who will  finance your business can all affect your choice for the business structure you decide to set up.

Here are some of the more popular business structures:

• S-Corporations
• C-Corporations
• Limited Liability Companies
• Limited Liability Partnerships
• Sole Proprietorships
• Partnerships
• For-Profit Corporations
• Not-for-Profit Corporations
• Professional Organizations and Associations
• Family Limited Partnerships

So if you are thinking of setting up a corporation in Texas, which is better - a Texas Limited Liability Company (LLC) or a Texas Corporation?  In most cases, a Texas Limited Liability Company (LLC) is a better method to operate a business in Texas.

Most business owners incorporate for two primary reasons:  to insulate themselves and their family from business liabilities and to help reduce federal income taxes.  Operating as a corporation, shareholders are not personally liable for corporate obligations.  However, until September 1, 2007, businesses had no similar protection from liabilities created by the business owner.  If a majority shareholder of a corporation was sued and a judgment taken against that shareholder, the judgment creditor could "seize" the shareholder's stock, take control of the corporation, liquidate its assets and put the shareholder out of business!  The judgment creditor could threaten to do this and the shareholder would be forced to settle for cash which normally comes from the business in the form of a loan or sale of assets.

Texas has now become a "complete shield" state for Limited Liability Companies (LLCs).  This means that Texas has limited the remedies available to a judgment creditor of an individual member of a LLC to one remedy, "charging orders" only.  Now a judgment creditor cannot "seize" the equity of an individual member and cannot threaten to take your company away from you in order to make you settle.

In addition to better liability protection, other advantages are:

Flexible Profit Distribution:  Limited Liability Companies can select various forms of distribution of profits.  Unlike a common partnership where the split is typically 50-50, LLCs have much more flexibility.

No Minutes:  Corporations are required to keep formal minutes, have meetings, and record resolutions.  The LLC business structure requires no corporate minutes or resolutions and is easier to operate as there is no board of directors or annual meeting.

Flow Through Taxation: All your business losses, profits, and expenses flow through the company to the individual members.  You avoid the double taxation of paying corporate tax and individual tax.  Usually this will be a tax advantage, but circumstances can favor a corporate tax structure.

Are you starting a new business and unsure of what type of organization is best for you?  If so, call Barry.  He will customize his services and knowledge so that he is able to serve your specific business needs.  He can help you grow into each phase of your new business.