So you’re thinking about buying or starting a business and forming a partnership or LLC. Congratulations! You are on the verge of starting something that most people can only dream of. You want to make sure your dreams don’t turn into a financial headache and expose your personal assets. But how? You can protect your personal assets by forming a Business Partnership, Corporation, or LLC. How do you choose what is best for your new business?
Chrisman, Ramsey & Foster PC has answered some common questions below pertaining to Business and Corporate Law in Partnerships, Corporations, and LLCs.
What is the difference between a Partnership, Corporation and LLC?
Partnership is created when there is an association of two or more person as owners to carry on a business for profit regardless of whether the persons intend to create a partnership. Common forms of partnerships include general partnerships, limited partnerships, and limited liability partnerships. While a general partnership does not require an agreement to be in writing or any filing with the state, a limited partnership and limited liability partnership must file a certificate of formation with the Texas Secretary of State.
Corporation is created by filing a certificate of formation with the Texas Secretary of State. Corporations are owned by shareholders and managed by directors. The corporation must be operated according to its bylaws. A key feature of a corporation is that it is considered a legal person separate from the shareholders. This protects assets owned by the shareholders from liabilities of the corporation. Another benefit of a corporation is the ability to allocate tax liability by electing to be taxed as an S-Corp if certain requirements are met.
Limited Liability Company has powers of both a corporation and partnership. It can only be created by filing a certificate of formation with the Texas Secretary of State. Owners of the LLC are called members, and can be individuals, other corporations, partnerships, or any other commercial entity. LLC’s are run by either members or managers. A key benefit of a LLC is that liability of the member can be limited to their investment.
Do partners in a partnership owe each other a fiduciary duty?
Yes. Partnerships are subject to the Texas Business Organization Code. Under Texas law, a partner owes the partnership and other partners a duty of loyalty and duty of care.
Christman Attorneys, PLLC has helped hundreds of companies meet their business goals. Protecting our clients’ rights while preserving their valuable resources and time is one of our highest priorities in our Business and Corporate Law practice.
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Disclaimer: The materials available at this web site are for informational purposes only and not for the purpose of providing legal advice. All materials have been prepared for general information purposes only to permit you to learn more about our firm, our services, and the experience of our attorneys. The information presented is not legal advice, is not to be acted on as such, may not be current, and is subject to change without notice.