Business Formation – Kirker Davis LLP

Austin Business Formation Attorneys

Legal Business Formation in Austin

When launching a new business, business owners need to select the most appropriate entity type and, in so doing, must digest and analyze many relevant factors and options. Owners who mainly operate on their own may elect to operate as a sole proprietorship. Alternatively, owners who want to shield personal assets from liability and issue shares, among other things, may form a corporation. Each business is different, and considerations include, but are not limited to:

  • Cost and complexity of formation 
  • Tax treatment 
  • Limitations on liability 
  • Ongoing administration 

Below is a brief breakdown of several entity options, along with relevant characteristics.

Sole Proprietorships

An individual operates a sole proprietorship when they conduct business on their own and do not undertake any formal business formation. For example, an individual offering tutoring services is a sole proprietor. Some characteristics of sole proprietorships include:

  • Simple and inexpensive to form – no paperwork or filings are required 
  • Owner can report business profits and losses on personal tax returns
  • Owner is personally liable for business debts and obligations 

Partnerships

A partnership is like a sole proprietorship, but partnership entity formation requires at least two business owners. Much like a sole proprietorship, a partnership’s business owners are not required to file the partnership with the state, and investing partners report earnings, profits (or losses) on personal tax returns. The three types of partnerships are: (1) General Partnership; (2) Limited Partnership; and (3) Limited Liability Partnership.

Limited Liability Companies (LLCs)

An LLC is often considered a hybrid of the corporation and the limited partnership. Some key characteristics of an LLC include:

  • Owners are shielded from personal liability for acts of the LLC and other members
  • An LLC can have an unlimited number of Owners with any mix of individuals and business entities 
  • There is flexibility in taxation – an LLC can be taxed as a sole proprietorship, partnership, or  corporation      

Corporations 

Corporations are the most complex business entity type and require the most legal formalities. Key characteristics of corporations include:

  • Officers must hold regular meetings, make financial reports, keep minutes, allow inspection of records by the corporation’s shareholders, and comply with a variety of other required actions 
  • A corporation has limited liability 
  • A corporation is owned by the shareholders
  • A corporation is an entirely separate operating and legal entity

Consult with a Business Formation Attorney 

Kirker│Davis LLP provides legal assistance to potential or established business owners who: 

  • Have startup ideas
  • Recently purchased a business
  • Have undergone a merger or acquisition 
  • Want to examine whether the current structure is the most appropriate for their business

Whether forming a business or considering altering your business’s form, if you would like legal help or have questions, please call Kirker│Davis LLP at 512-746-1746 or contact us online.

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