New business growth brisk in Texas: choice of business entity

One of the first decisions of a new business owner is choosing an entity likely to help meet the goals of the business.

On April 7, 2016, Texas Secretary of State Carlos Cascos announced a steep increase in the number of new businesses that were created in the Lone Star State in March 2016 as compared to March 2015, an increase of almost 10 percent, according to a press release from his office. Similar growth was consistent throughout the entire first quarter of 2016.

In March 2016, 16,511 certificates were filed with the Secretary of state's office to create new businesses for profit, including those for corporations, professional corporations or PCs, professional associations or PAs, limited liability companies or LLCs and limited partnerships or LPs. Of course, this does not even include sole proprietorships in which individual business owners go into business by themselves, so the number of new Texas businesses is actually even higher.

The overall business climate in the state has been healthy of late, with recent or upcoming influx of investment or operations by Apple, eBay, Restoration Hardware, Toyota, Active Network, Occidental Petroleum, Charles Schwab, Oracle, Pegasus Foods, Liberty Mutual, JP Morgan Chase, Raytheon, State Farm, McKesson Corporation and more.

When large companies open their doors, the surrounding communities benefit by an uptick in the need for other businesses to support the needs of the workforce and in other related commercial activity. It is in this context that Texans may decide that now is the right time to open their small- to middle-sized businesses.

One of the first decisions for a new business owner to make is to choose an attorney to provide legal advice and guidance throughout the startup process. The primary decision to make once legal counsel is on board is which kind of legal entity should be created. A lawyer can help the business owner to refine short- and long-term goals and analyze which kind of entity would be most in line with those goals.

The main issues to consider when choosing a business entity are:

  • Whether the owner would be personally liable for business debt and liability
  • Whether there are co-owners and what roles they anticipate playing
  • How much control the owner would have over business decisions
  • What the tax implications would be
  • How difficult it would be to wind down the business or for the founding owner to disassociate, if necessary
  • Whether there is something about the particular type of business that favors certain business forms

Common choices for entity type include sole proprietorships, partnerships, corporations, LLCs and more.

The Dallas attorneys at Key Harrington Barnes PC represent small- and medium-sized business owners in the Dallas-Fort Worth Metroplex and across North Texas in business-entity choice and other legal issues involved in business startup like document and contract drafting and review, regulatory filings, real estate matters, employment and labor law, workplace safety and more.