Dallas Business Start-Up Lawyer Simplifying the Process of Starting a Business
When starting a business in Dallas, there are numerous issues to consider first. From entity selection to drafting the appropriate contracts, sound legal representation is key.
At The Hunnicutt Law Group, we can help you answer those questions from the very beginning.
The Very Beginning: Choosing A Business Structure
Maybe you want to start a new business for freedom. Maybe you want to start a new business for certain tax options or legacy purposes. Whatever your reasons, the business structure you choose is vital to achieving your goals. In Texas, the main structures from which you can choose are:
- Sole proprietorship,
- General partnership,
- Limited partnership,
- Limited liability partnership,
- Limited liability company,
- Series limited liability company, and
Finding the right entity type is crucial. It can offer business owners the right level of protection, both from a legal and tax standpoint. It can offer different advantages in terms of obtaining and retaining investors, and it can either be dissolved by a simple or more complicated process.
Our Dallas business formation attorneys then walk our clients through the simple and essential questions:
- Who are your customers?
- Who are your suppliers?
- What’s your market?
- What kinds of contracts will you need?
A sole proprietorship is probably the easiest entity to start. This is because you do not have to file formation paperwork with the Secretary of State to start your business. The beginning of a sole proprietorship can be simple, but this business structure is not without its complications. Sole proprietors are personally liable for the financial and legal problems of their businesses. Disputes can pop up frequently in any business, and this can be a lot of liability to undertake.
Like sole proprietorships, general partnerships are quite simple to start and do not require you to file formation paperwork with the state. Even if you do not mean to start one, you normally begin a general partnership when you conduct a for-profit business with at least one other person.
Unfortunately, general partners are personally liable for the partnership’s issues. General partners are also liable for the wrongful acts other partners commit in the regular course of business or at the direction of the partnership. And if you want to sell your right to manage and receive profits from the partnership, normally all other partners must consent.
A limited partnership offers a hybrid of financial and legal protections. Limited partnerships have at least one general partner and one limited partner. The general partner is still personally responsible for the business’s legal and financial woes. On the other hand, a limited partner usually does not have personal liability unless they control the business and behave as if they are a general partner. While the personal protections afforded to limited partners might sound attractive, you will likely have to accept a smaller share of business profits and less control over the business to enjoy those protections.
You must file a Certificate of Formation with the Secretary of State to form a limited partnership. Your limited partnership must also enter into a partnership agreement that governs how partners will run the business and interact with each other.
Limited Liability Partnership
In a limited liability partnership, none of the partners are personally liable for the partnership’s financial and legal obligations. You have to file an Application for Registration with the Secretary of State to form this kind of partnership. To keep your limited liability partnership legally compliant, you must keep up with Annual Report filing requirements.
Limited Liability Company
Forming a limited liability company (LLC) is a way to run a business alone or with others without having personal liability for the business’s debts and obligations. Owners (also called members) of this business structure enjoy many of the same personal protections as shareholders of corporations. But LLC members are not subject to corporate double taxation.
However, transferring ownership in an LLC is often more complicated than transfers in a corporation. Unlike corporate shareholders, usually all LLC members must agree to admit a new member.
Texas law requires you to file a Certificate of Formation with the Secretary of State to start a limited liability company.
Series Limited Liability Company
A series LLC can offer you an added layer of protection if your LLC owns many assets (for example, separate pieces of property). In a series LLC, you can separate your assets into individual groups that are unaffected if legal or financial issues attach to another group in the series.
Both corporations and LLCs can offer you the highest level of liability protection, but corporations can give you the added bonus of easily transferable ownership shares. This business structure can be great for raising capital without taking out loans, but it has its own drawbacks.
Corporations are subject to double taxation. This means the entity itself must pay income taxes, and its shareholders must pay income taxes on their share of the corporate income. You can avoid double taxation by electing S Corporation status, but this status significantly limits the amount and kind of shareholders your corporation can have.
A corporation also involves more formalities for starting and running a business. To start a corporation, you must file a relatively detailed Certificate of Formation with the Secretary of State and adopt bylaws.
How To Decide Which Business Structure Is Right For Your Start-Up
There are many reasons to choose one business structure over another. The structure you choose depends on many facts specific to your needs, but the main elements to consider in this decision are:
- How easily transferable you want your business to be;
- How much management control you want your co-owners to have;
- How you plan to raise business capital;
- How much time and how many resources you have to keep up with business filing requirements;
- How many resources you have to keep up with business tax obligations;
- How much personal liability you can handle; and
- How many business owners you will or want to have.
To make the best decision, you might also have to consider known or unknown factors that are very personal to you. A Dallas business start-up lawyer can help you determine what factors are most important in this decision and choose the best business structure for your needs. An attorney can also draft important business administration documents (e.g., bylaws, LLC agreements, partnership agreements) to help you get the most out of the business structure you choose.
Contact Our Dallas Business Formation Lawyers To Talk About Your Start-Up
Drafting the right contracts and documentation will set your business up for the future and keep you away from costly litigation. When necessary, we work with other attorneys and professionals who can provide necessary support so that your business is fully covered and protected.
Our experienced lawyers also handle clients with other types of business cases, including: