Texas Corporation and Partnership Law

Structure your Texas company to protect personal assets and maximize tax savings

Starting a Texas business requires deciding whether incorporating in Texas or forming a Texas partnership will provide the most desirable benefits. The decision can be crucial to your business’ success, as it determines the amount of risk that you personally assume, the number and type of shareholders you are permitted, your tax obligations, and government regulatory requirements .

Incorporating in Texas is usually the preferred option as it attracts investors and provides the most personal liability protection. However, if you do not have outside investors or other stakeholders, this might not be the best option for you because profits will be subject to taxation at both the business and personal levels.

Forming a business under Texas partnership law alleviates the potential double taxation problem because business income from a partnership is subject only to personal income tax.

The options available for incorporating in Texas or forming a Texas partnership under Texas corporate law are:

1. Business Corporation

2. Professional Corporation

3. Limited Liability Company (LLC)

4. General Partnership

5. Registered Limited Liability Partnership

Bet on the Texas business structure that's best for your business

When determining which legal structure is best for your business, assess personal liability obligations, understand the tax implications, become aware of operating formality requirements, and familiarize yourself with any related reporting regulations

Turn your business idea into an official Texas company

You must file an application with the Texas Secretary of State and pay a fee in order to form companies in Texas. For example, forming a Texas RLLP requires filing an application with the Texas Secretary of State and paying a fee of $200 for each partner.

Know your legal obligations under Texas corporation and partnership law

Texas corporation laws require Texas companies and partnerships to comply with all respective formation, operating, reporting, and disclosure requirements. The requirements are specifically set forth under each enabling statute.

  • Depending on where you do business, you might have a choice of which state(s) you can choose for incorporation or forming a partnership. State laws vary, so conduct your own research or find an attorney who can advise you as to which state's laws will be most advantageous to your business needs.
  • Texas Corporation and partnership law is favorable to Texas partnerships as it allows general partnerships to restructure as registered limited liability partnerships (RLLPs). Texas partnership law protects partners in an RLLP from liability for debts and obligations assumed by other partners or their agents. Thus, RLLPs allow for all the operational freedoms of a partnership while granting the protections offered by a corporation - whereas an LLC requires adherence to strict operating formalities in order to incur tax benefits.
  • Texas corporate law also authorizes limited liability companies, which are regulated like corporations and provide the similar liability protection, but are taxed like partnerships.

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