Choosing the Entity Type for Your Business
Consult a Woodlands Business Law Attorney
If you are considering the formation of your own business, choosing which type of business is best for your company may be complicated and a bit overwhelming. Our Montgomery County business attorneys can explain what an l is and what the benefits are for your business.
Limited Partnerships (LP), Limited Liability Companies (LLC), and Corporations are popular because they offer their members protection from business debts. LP's, LLC’s, and S-Corps act as pass-through tax entities, meaning the profits and losses of the business pass through the owners who are responsible for reporting them on their personal tax returns similar to how they would if they were a member of a sole proprietorship or partnership.
What Limited Liability Means for You
The primary purpose of forming an entity is asset protection for the owners. If your business is unable to repay creditors, lenders, or suppliers, they can only legally attempt to collect money from the company and not the personal wealth of the owner. An entity can only use the business assets to pay off the business debts.
However, forming your business as an entity does not absolve you of all liabilities.. there are exceptions. As an owner of an LP, LLC, or Corporation, you may be held personally liable if you do any of the following:
- Personally guarantee a loan or business debt
- If an owner commits fraud intentionally and it harms the company or others
- If an owner does not separate the company from their personal affairs (comingling of assets)
- If the company is inadequately capitalized
- If the owner does not respect the corporate formalities
Let Dossey & Jones, PLLC Help You
If you are considering forming a business and you would like more information on how to create and manage a new business, our Montgomery County business lawyers can help provide you with the tools you need to make an educated decision.