Business Entity Choice in Texas

Posted by David Armstrong | May 19, 2022 | 0 Comments

Choosing Business Structure in Texas  

There are several different business entity choices in Texas (and across the USA).  Before you begin your business, I suggest that you carefully consider which makes sense for you (your associates, if any) and your endeavor.

Sole Proprietorship:   This is the simplest means of starting a business.   The sole proprietor can also take on an assumed name (sometimes called a dba, or doing business as)  which can be filed with the county in which business will be conducted.   The best part about the sole proprietorship is its simplicity—all profits, all decisions, everything is the individual's choice.   But there is no protection legally or financially from the results of the business.   It all tracks back to the individual person.

Partnership:   A partnership can be used when beginning business with someone else.   There is someone else to assist with decisions and work load, and perhaps more importantly, loans may be easier as there are two (or more) involved and credit issues are more easily overcome.   Liability remains about the same.   All of the agreements on how to run the business, how to make decisions, how to pay for things, should be put in writing, clearly, prior to starting, or the partnership is likely to have problems while it is ongoing, and definitely will when it is time to wind up the business.  

Corporation:   There are several different versions of the basic corporation, including those that are ultimately a tax decision (S Corp or C Corp).    The beauty of a corporation is it is entirely separate from the people who run it.   If there is a financial problem or a legal problem, a corporation can be a good way to insulate individuals from problems of the business.     

Limited Liability Company (LLC):   This format allows the individual's liability to cap out at the amount of the person's investment in the company.   It has similar insulation from business troubles, both as to legal and financial problems, as the corporation.       

It is important to think through the possibilities prior to starting your business, and more importantly yet, to be sure to have a clear agreement for how the business will be run prior to starting.   Having such an agreement/document in place is the best possible decision you can make—and an experienced attorney is a huge help in preparing the agreement.   This is true not only because of the actual clarity in writing the agreement, but also because of the invaluable assistance in thinking through the decisions and practices necessary to begin a business.       

About the Author

David Armstrong

J.D. University of Houston, 1995


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