Business Incorporation | Business Formation | Forming a Texas Business Entity

New business owners face many important decisions and one of the first is selecting the type of entity for their business. Individuals and business owners often look to form a LLC, or form a corporation to shield themselves from the liabilities of the business. Our Dallas business formation lawyer assists new and existing small business owners with legal matters related to entity formation, whether they desire to operate as a closely held business, limited liability company (LLC), partnership, limited partnership (LP or Ltd.), or corporation (Inc.). If you are considering incorporating your business in Texas, the information below is intended to present a basic overview of some of the most common Texas business entities.

Common Texas Business Entities

Small business owners should become familiar with the different types of entities, and then coordinate with a business formation lawyer and tax professional regarding the best entity choice considering the long term goals of the small business owner. See the Texas Entity Comparison Chart.

The most common business structures in Texas are as follows (click on the link below for more details):

Texas Corporation
Texas Limited Liability Company
Texas Limited Partnership (“LP” or “Ltd.”)
General Partnership (formal formation not required)
Sole Proprietorship (formal formation not required)

Texas Corporation

The Texas Corporation is one of the oldest and most popular entity choices for small businesses in Texas for several key reasons. First, the IRS allows certain Texas corporations to enjoy pass-through taxation. This can be very tax advantageous. Also, most small businesses elect to take advantage of the S Corp status. Click here for more information about forming a Texas Corporation and the Texas S. Corp.

Texas Limited Liability Company or Texas LLC

The Texas LLC is quickly becoming a popular choice of entity in Texas for all sizes of businesses. Unlike the Texas Partnership, an individual can form a single member LLC in Texas. Click here for more on LLC formation in Texas.

Texas Limited Partnership or LP or Ltd.

Texas partnerships can be used for simple small business as well as large enterprises. The limited partnership requires two types of partners: general partners and limited partners. If the partnership is set-up and managed properly, the limited partners will have liability protection from the debts and obligations of the partnership. Click here for more information on Texas limited partnerships.

General Partnership – GP

A general partnership is created when two or more persons associate to carry on a business for profit. A general partnership operates in accordance with a partnership agreement, but there is no requirement that the agreement be in writing and there is no state filing requirement. Like a sole proprietorship, a general partnership does not require any formal action and will automatically exist if certain criteria are met. In the absence of a written partnership agreement, Texas has enacted statutes to provide an overall structure for the management and operation of the general partnership. Each individual partner, and the partnership as a separate and distinct entity, is jointly and severally liable for all debts and obligations of the partnership. Dallas small business lawyer Zac Copp can draft a partnership agreement for clients who choose this type of business structure.

Sole Proprietorship

The simplest form of business structure is the sole proprietorship. In a sole proprietorship, a single individual engages in a business activity without formal organization. Under Texas law, a sole proprietorship has no separate legal existence apart from the sole proprietor. The sole proprietor has all the control of and responsibility for the business operation and business decisions. The sole proprietor owns all the business property as an individual but also assumes unlimited personal liability for all debts and other claims against the business. If the business is conducted under an assumed name (a name other than the surname of the individual), then an assumed name certificate (commonly referred to as a DBA) should be filed with the office of the county clerk in the county where a business premise is maintained. Dallas small business lawyer Zac Copp often represents sole proprietors in their pursuit to form a new business entity such as a LLC, limited partnership, or corporation for their existing sole proprietorship business.

Once your entity formation is complete, let one of our Dallas contract lawyers help draft the contracts for your business.