Texas Business Organizations

Are you ready to start your own business? Or maybe you’re already doing business under your name and you want to create a separate business entity. Texas law provides several options to choose from, including:

  • Corporation
  • Limited Liability Company
  • Partnership

The Texas business organization lawyers at the Law Office of Derek R. Van Gilder will recommend the best type of organization for your business and we will set it up for you.

Business organizations are established through the Texas Secretary of State’s Office. Information about the various forms of business organization and all necessary forms can be found on their website. Before setting up a new business organization, it is necessary to search their records to confirm there is not already an existing organization with the same name.

It’s important to understand, there is not a “best” type of business organization for all businesses generally. The best type of organization for your specific business will depend on many factors including, the size of your business, the nature of your business, the management structure, taxation, and many other factors.

Texas Corporations

A Texas corporation is created by filing a Certificate of Formation with the Texas Secretary of State. 

Under Texas and United States Law, a corporation is considered to be a legal “person.” Doing business as a corporation, if all the rules are followed, will provide limited liability to the owners. Some other benefits of operating as a corporation are:

  1. continuation of operation if an owner dies or becomes incapacitated;
  2. ownership interests can be sold or transferred, in whole or in part, under the terms of the corporate charter; and
  3. the corporation can raise capital by selling additional shares.  

Each owner of the corporation is a “shareholder.” A corporation is usually managed by the “Directors,”  but Texas law allows shareholders to enter into shareholders’ agreements to eliminate the directors and to allow for management by the shareholders management. 

Texas “S” Corporations

United States federal tax law allows a for-profit corporation to designate itself as an “S Corp” by filing an election with the IRS. The primary benefit of electing to be an S Corp is simplification of tax returns, which may be beneficial to some small businesses.

Texas Limited Liability Companies (LLC)

A Texas corporation is created by filing a Certificate of Formation with the Texas Secretary of State.

A limited liability company (LLC) is a type of organization that combines some of the benefits of a corporation and some of the benefits of a partnership–although it is neither a corporation nor a partnership.

An LLC can be structed in a few different ways, all of which provide limited liability (like a corporation) if the rules are strictly followed. It can be structed to operate similar to a general partnership, a limited partnership, or an S Corp, but without the special ownership and federal tax restrictions applied to a corporation.

Texas Partnerships

Texas law allows two or more people to establish a partnership to operate a for-profit business. Partnerships are created by a Partnership Agreement and there is no requirement of filing that agreement or any other formation documents with the Texas Secretary of State. There are three types of partnerships:

  • Texas general partnership;
  • Texas limited liability partnership; and
  • Texas limited liability partnership.

NOTE: There is no actual requirement that a partnership agreement be in writing, but it is highly recommended.

Texas General Partnership

A general partnership is created when two or more persons associate to carry on a business for profit. A partnership generally operates in accordance with a partnership agreement, but there is no requirement that the agreement be in writing and no state-filing requirement. If the business of the partnership is conducted under an assumed name (a name that does not include the surname of all of the partners), 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. If no business premise is maintained, then an assumed name certificate should be filed in all counties where business is conducted under the assumed name.

The complex business structure lawyers at the Law Office of Derek R. Van Gilder have the experience you can rely upon for advice in setting up more complicated business operations. Derek Van Gilder is a Master of Business Administration and a lawyer. He will work with your Chief Financial Officer, C.P.A. and management team to formulate a corporate organizational strategy to achieve your objectives.