Forming a New Business in Texas

Building a Solid Foundation for Your New Texas Business

Just a Few Legal Aspects of Launching a New Texas Business

Starting a new business for many Texans is the fulfillment of the "American Dream"; at the same time being a business owner comes with added responsibility. With any major life choice there are decisions that must be made before you are ready to forge ahead. The process of forming your new business comes with new challenges and opportunities. Anyone starting a new business in Texas should consult an experienced attorney before filing any paperwork or making any major decisions.

An attorney with experience working with new businesses owners and existing business owners will help you make sure the structure of your new business takes advantage of the protections Texas law offers.

Choosing the correct business formation, developing a formal business plan and finding the insurance coverage required to mitigate financial risks are all decisions thrust upon new business owners. While an attorney can help with these decisions it helps if a new business owner has a great understanding of these issues prior to meeting with an attorney for the first time.

Choosing Your Business Formation

There are five main types of non-professional business entities recognized under Texas Law.  A non-professional business refers to any type of business that is not filed as a Professional Corporation, P.C., these types of entities are normally reserved for the corporate formation of licensed professionals such as attorneys, architects, engineers, public accountants and physicians. If you a seeking to form any other type of business in Texas one of the five main types of non-professional businesses will most likely meet your needs:

  • Sole Proprietorship
  • General Partnership
  • Corporation
  • Limited Liability Company (LLC)
  • Limited Partnership (LP)

Each type of entity offers advantages and disadvantages to the business owner(s). As an example a sole proprietorship is the simplest type of business to setup and allow the owner absolute control over the business. However, the owner also accepts personal responsibilities for any liabilities of their business.

General Partnerships are similar to sole proprietorship in regards to the liability of the company, but the liability is shared between 2 or more of the listed partners based on the agreement made prior to the business formation.

Corporations can be a bit more complicated, as they exist as a separate entity apart from the owners. Individuals do not own corporations, they are owned by shareholders. The majority of newly Texas corporations are privately owned by a group of individual shareholders or existing business entities. In the case of corporate formation the liability falls to the corporation itself, and not to the individual shareholders.

Limited Liability Companies (LLC) offer a unique hybrid between a partnership and a corporation. Individuals that will share in the profits of the business but are protected from any personal liabilities typically own an LLC. Limited Partnerships are similar to an LLC in that they are typically owned by a combination of general partner and limited partners. Limited partners can share in the profits of the business, while functioning more like shareholders.

The consultation of an attorney with experience dealing with new business formations is a simple step to get your business off on the right foot. In most cases new business owners are more focused on the service, product or idea that is driving them to launch a new business and not the liability aspect of their new business and how this will be handled in the event of unforeseen circumstances.

Texas Business Policies

One area many new businesses overlook in the creation of their new business is business policies. When creating a business plan the brunt of the effort goes to developing marketing strategies, financial models and management of operations. All of these are key elements to insure a successful launch of a new business in Texas. Business owners also need to carefully review Texas laws or any other state they operate to ensure their policies are in compliance with not only state law but also OSHA standards. Creating firm policies that outline the duties of the partners, shareholders, and members will go a long way in protecting the business.

Businesses that are planning on hiring employees, should plan on generating an employee handbook that clearly outlines policies related to social media, smoking, dress codes, earned paid vacation and expected behavior. A simple employee handbook can go a long way in protecting an employer and help set the standards for employment.

Protecting Trade Secrets

Texas has strict guidelines pertaining to trade secrets and protecting businesses and business owners. Texas Legislature enacted a new law that went into effect on September 1, 2013, the Texas Uniform Trade Secrets Act (TUTSA), to address the growing problem facing businesses when former employees steal formulas, customer lists, content related to training of employees or anything deemed trade secrets.

Protecting your business is preparing for the worst-case scenario and addressing the situation before it happens. By doing so as business owner or shareholder you are taking the simple steps required to protect yourself and employees against any unforeseen events. The simple consolation of a Texas Business Planning Attorney can wind up being the best first investment in your new company.

To arrange for a consultation, please complete our short consultation form and a member of our offices will contact your personally or call (972) 731-6500. Hanshaw Kennedy, LLP law offices are located at 1415 Legacy Drive, Suite 350 Frisco, Texas 75034.

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