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Business Law

What is the best type of business entity for my business?


Each type of entity, whether it be a corporation, limited liability company, limited partnership or other business form, has its advantages and disadvantages. An overview of some of the characteristics of the more frequently used entities are listed below.


Business Entity

Liability of Owners

Other Characteristics


Sole Proprietor:


Unlimited liability for all.


No organizational costs. No special record keeping requirements.


Limited Liability Company (LLC), Professional LLC:


No personal liability for members (owners) for business debts, except by contractual guarantee.


Maximum flexibility in management, financial structure, and federal taxation but must pay Texas franchise tax; $300.00 filing fee for Secretary of State.


Corporation; Professional Corporation:


No personal liability for shareholders for business debts except by contractual guarantee.


Managed by a Board of Directors, unless shareholder approval is required. Subject to somewhat greater financial and management restrictions than LLC’s; $300.00 filing fee for Secretary of State; must pay Texas franchise tax.


General Partnership; Limited Liability Partnership:


Each general partner has unlimited personal liability for partnership obligations and acts of other partners, except in a limited liability partnership requiring annual registration and maintenance of insurance.


All partners have equal management and ownership unless otherwise agreed.  Law requires limited liability partnership to maintain insurance and register annually.


Limited Partnership:


General partner has personal liability. Liability of limited partners is limited to their respective investment in the partnership.


Managed by general partner(s), except for acts requiring consent of the limited partners.