One of the most important decisions for a small business is often one of the first that they have to make – under what business legal structure, also know as formation, to operate. Absent any proactive action, businesses operate either as sole proprietorships or general partnerships. The risk is that owners are not only personally liable for the debts of their businesses, but even for the business debts of their co-owners. Prudent business owners, with planning and care, can shield their personal assets from most, if not all, of these debts. Known as “limited liability,” this concept is fundamental to the growth of the private sector since the days of the Dutch East India Company in the 17th Century.
Carter Thompson has assisted dozens of businesses form limited liability companies, corporations, limited partnerships and limited liability partnerships. His clients have included technology start-ups, oilpatch service companies, and bars and restaurants – both new and established. It is never to late to reassess your company’s structure and exposure to risk. No business is too small to consider the benefits.
Identifying the business form with the most advantages is the first step. The business association must then be registered with the state, effectively creating an entity with an existence separate from its owners. A corporation must also enact by-laws, a limited liability company an operating agreement, a partnership a partnership agreement. These documents all relate to the relationship of the owners of the business, and address issues including division of profits, management, governance, and withdraw. These are vital documents that must be carefully negotiated, drafted, and executed.
A business’s choice of business form can greatly effect the potential liability of the owners. This decision will also impact issues of company governance, transferability, and taxation. Texas and federal law provides significant flexibility in such matters, provided businesses take the initiative to properly plan. The Law Office of Carter H. Thompson would be pleased to assist your business with these issues.