Business Formation

There are five forms of business entities recognized by the State of Texas (in additional to the sole proprietorship, which is not required to file with the Secretary of State).

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The five forms of business entities that are required to file are the following:

  1. Corporation (“C” Corp. and “S” Corp.)
  2. General Partnership (GP)
  3. Limited Partnership (LP)
  4. Limited Liability Partnership (LLP)
  5. Limited Liability Company (LLC)

Decisions about business formation require careful consideration of numerous factors related to the daily operations and goals of the business. Improper business formation at the outset of a business venture can create a number of administrative challenges and adverse tax consequences at the state and federal level, which often are practically impossible to resolve at a later date. Some important factors to consider when determining the appropriate structure for business formation are: the number of people involved in the venture, the expected duration of the venture, the likelihood that stock in the company will be issued to the general public, the differences in annual tax liability for each business form, as well as a number of industry-specific considerations. Some businesses have multiple options when it comes to business formation, whereas other businesses may have more limited options, often depending on the particular industry. It also is important to keep in mind that the organizational structure or business form should align with the present needs of the company as well as the potential long-term needs of that business. Taking time to adequately understand the legal implications of various options for business formation is essential for success in any business venture.


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The Summit, McKinney, Texas