Business Formation Lawyers in Houston

What are the main types of business entities in Texas?

 

Texas business owners can choose from four primary business structures, which include sole proprietorships and partnerships, Limited Liability Companies (LLCs), and corporations (S-Corp and C-Corp). The establishment of sole proprietorships and general partnerships remains straightforward; however, these business types often fail to protect personal assets from business risks. The Texas Secretary of State requires filing entities, including LLCs and corporations, to register for business operations. In contrast, these entities establish legal separation between business assets and the owner's personal assets.

 

Which business structure suits my needs best for operating in Texas?

 

Your business structure selection depends on three main factors: the number of owners, personal liability protection needs, and tax implications. New businesses commonly select LLCs because they provide both liability protection and tax benefits through pass-through reporting, which allows business income and losses to appear on individual tax returns. Businesses that want to attract significant outside funding through outside investors should establish themselves as corporations. A lawyer will assess your specific needs to determine which business structure best suits your needs. 

 

Does a Texas business owner need legal representation to establish their business?

 

The process of business formation remains possible without legal assistance, yet professional legal advice strongly recommends it. Legal representation helps clients select the appropriate business structure and create essential governing documents, thereby preventing future legal complications that could result in personal liability. The attorney provides guidance about protecting intellectual property, making contracts, and handling essential legal matters.

 

What steps must I follow to establish a formation? 

 

The first step involves selecting a unique business name and appointing a registered agent to handle official documents. The Texas Secretary of State requires you to submit a Certificate of Formation while paying the associated fees.

Texas business owners who want to establish an LLC must complete several requirements, including filing costs. The state of Texas does not require a Company Agreement (Operating Agreement), but businesses need this document to develop their internal management structure. Your business requires an Employer Identification Number (EIN) from the IRS, as well as all necessary local business licenses and permits.

 

What is the purpose of a Company Agreement (Operating Agreement) for Texas LLCs, and why should I create one?

 

A Company Agreement (Operating Agreement) functions as a legal document that establishes the operational framework for LLCs. The document establishes ownership details, member responsibilities, and management procedures for the business operations. Texas law does not enforce Company Agreement (Operating Agreement) requirements for LLCs, but businesses should establish this document because it serves as their best protection. The document establishes clear business rules that prevent member disputes and maintain business separation from owners, thereby protecting their personal assets.

 

What function does a Registered Agent serve, and why must I have one?

 

Your business needs a Registered Agent who will accept all legal documents, including lawsuits, subpoenas, and official government correspondence. All filing entities, including LLCs and corporations, are required by state law to maintain a registered agent with a Texas street address. Business owners can serve as their own registered agents, but many opt for professional services to handle document delivery and protect their personal address from public disclosure.

 

What is the purpose of a DBA registration, and when should I obtain one?

 

The state of Texas requires businesses to register their Assumed Name Certificate, which serves as a DBA, or "Doing Business As," document. The legal registration process enables businesses to operate under names that differ from their official business name. A DBA registration enables Jane Doe to operate her business under the name "Jane's Cleaning Service" when she files the necessary documentation. A DBA registration does not create a legal business entity, and it fails to protect personal assets from business risks.

 

What are the primary distinctions between operating an LLC and running a Corporation?

 

The main advantage of both LLCs and corporations is their ability to protect owners' personal assets from business financial obligations. The primary distinction between these business structures lies in their organizational structure and tax implications. A corporation operates with strict rules that require both a board of directors and a shareholder management structure. The business tax structure of C-Corps leads to double taxation because profits get taxed at the corporate level and shareholders must pay taxes on their dividend earnings. LLCs operate with flexible management structures and pass-through taxation, which allows business profits and losses to be reported directly on the individual owner's tax return.

 

What does it mean to "pierce the corporate veil of the corporation"?

 

A court can use the legal procedure of "piercing the corporate veil. " The court takes this action when business owners do not keep their personal assets separate from their business operations through a corporate veil. This procedure eliminates corporate or LLC limited liability protection, requiring owners to personally pay company debts. Activities include mixing company funds with personal money, neglecting corporate documentation, or using the business to perpetrate fraudulent activities.

 

What steps should I follow to select a business name in Texas?

 

The selection of a business name requires verification that it differs from all existing business entities registered with the Texas Secretary of State. The name selection process requires following Texas naming regulations by adding "LLC" or "Corporation" to the end when appropriate. A business attorney will assist you in performing a complete name search and securing name reservation status before you submit your formation documents.