Corporate Structures Series, Post #1: Do I Need an LLC, Corporation, or some other entity?

When starting a business, you may not always have the luxury of planning everything out.  You have a winning idea, it takes off, and suddenly – you’re in business! A little down the road, you start to realize the growth potential of your business and think you might need to consider forming an entity – but where to start??

There are several different types of entities in Texas: limited liability companies (LLC), general partnerships, limited partnerships, corporations, and even a sole proprietorship. Which entity is the best fit for you will depend on the types of risk you encounter in your business. If you are selling a single book to Amazon, you may not have much liability. In that case, it may be best for you to operate without an entity and enter into the contract with Amazon individually.  However, you may want to file an Assumed Name Certificate (also referred to as a “doing business as” or “dba” name) if you are worried your individual name will appear online. This does not create an entity, reserve the rights to a particular name, or provide any shield from individual liability; it merely allows you to operate under an assumed name for privacy purposes.

On the other hand, you may be a licensed electrician and have a consulting business. Because of the possible risks, you need more protection from liability and you might need an entity. To determine the best fit for you, we may ask how many business partners you have, whether your partners are family, how often you consult on projects, the type of customers you have (commercial or residential), how quickly you plan to grow, etc.

There are other things you might consider in addition to or instead of an entity. After discussing your particular situation, we may determine that a general commercial liability insurance policy would be a better fit for you.  The type of entity you choose will also depend on your tax situation, and you should discuss the benefits with your CPA. We are happy to work with your accountant to provide the most fitting framework to promote your success.

Choosing an entity type for your business does not have to be an overwhelming decision. Let us help you navigate the choices. Give us a call at (254) 300-7909 or come by and see us. We look forward to serving you.