Establishing the right foundation for your Texas business

June 05, 2013

Starting a new business can seem like a daunting process. While owning a business is a big part of many Texans' "American Dream," it is also a huge responsibility.

There are a lot of things to think about as part of the business formation process. Anyone starting a business in Texas would be wise to consult with an experienced attorney before filing any paperwork or making any major decisions. An attorney can help new business owners make sure the structure their business in a way that takes advantage of the protections Texas law offers.

Choosing a business entity, creating a business plan and finding insurance coverage are three of the biggest issues new business owners face. While an attorney can help with making these decisions, most new business owners can benefit from having a basic understanding of these issues before meeting with an attorney for the first time.

Choosing the right entity

There are essentially five main types of non-professional business entities recognized under Texas law: sole proprietorship, general partnership, corporation, limited liability company and limited partnership. Each entity type has advantages and disadvantages.

For example, sole proprietorships are the easiest to set up and offer the owner total control over the business. However, the owner also accepts personal responsibility for the liabilities of the business. General partnerships are similar, except that the ownership and control of the company is shared by two or more partners.

Corporations are a bit more complicated. Corporations are separate legal entities that exist apart from their owners. Unlike sole proprietorships and general partnerships, corporations are owned by shareholders. As such, liability attaches to the corporation itself, and not to the individual shareholders.

Limited liability companies function as sort of a hybrid between general partnerships and corporations. LLCs are owned by members who share in the profits of the business but who are protected from personal liability. Limited partnerships are similar. These businesses are owned by a combination of general and limited partners. The limited partners can share in the profits of the business, but they function more like the shareholders of a corporation.

Business policies

A business cannot survive without a business plan or without strong policies. In addition to creating a plan for marketing, inventory, finances and other issues, new business owners will have to carefully review the laws of every state in which they operate to ensure their policies are in compliance. Strong policies about the duties and responsibilities of partners, shareholders and members can go a long way toward keeping the business protected.

For businesses that are planning to hire employees, an employee handbook and policy would be a good thing to assemble. This should tell employees what the rules are relating to social media, smoking, dress code and other behaviors.

Insurance

It is important to make sure that a new business is protected with the right insurance. Some of the policies that new business owners should consider include the following:
- Workers' compensation
- Data breach
- Homeowners (for home-based businesses)
- Professional liability
- Commercial auto insurance (for catering trucks, delivery vans, and so forth)
- General liability

Every business will have different insurance needs. Business owners should purchase insurance that protects against their own mistakes, the mistakes of employees and any theft or incursion into the business.

Article provided by Gauntt, Earl & Binney LLP
Visit us at www.geblawyers.com