Business Law FAQs
Get Answers from an Award-Winning Richardson Business Lawyer
Starting a business is tough. Sustaining it can be even harder. With the
help of the
Richardson business lawyer at MAS Law Firm, you can take comfort knowing you’re making well
thought out business decisions that will preserve your interests for years
to come. Our firm has helped businesses for nearly two decades, and we
understand how to give our clients the information they need to proceed
Dial (972) 460-9339 now and schedule your consultation with MAS Law Firm.
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There is much to consider when taking the first steps toward a prosperous
future. We want to be there for you to guide you alone. Below you will
find some answers to questions our firm often hears. If you have further
questions, we are interested in making a positive impact on your situation.
Call us to schedule your initial consultation and let us help.
Is starting a business in Texas for you?
Starting a business can be exciting, challenging, and rewarding.
In order to see whether a business is for you, you should ask yourself
the following questions:
- Do you take orders from others?
- Do you think that your future is in someone else’s hands?
- Do you have to attend endless meetings at which nothing ever happens?
- Are you making money for someone else?
- Do you have to deal with difficult people?
- Are you tired of having your ideas ignored?
- Do you want the freedom to set your own schedule?
- Would you like to be the envy of your family, friends, and neighbors?
- Are you being held back by your education, age, race, sex, or background?
- Would you like to build an estate for your family?
- Would you like to spend more time with your family?
All around you, there are self-made business owners who had an idea or
offered a service and started a business. Now, those businessmen/women
are successful and are hiring employees to work for them. You have been
in business your entire life. Your product is your time and skills. Your
customer is your employer who purchases your product and skills. You sell
your product and skill and use the proceeds to cover your overhead, food,
shelter, transportation, and such. At the end of the month, what you have
left over is your profit.
What type of business is right for you?
Many people enter into business just for the money. They work very hard
to sell a product or service, and when they slow down, the business slows
down as well. Most people will slow down after a year or two in business,
as most people cannot keep up the energy level. The key to success is
to sell a product or a service that you find worthwhile and that also
makes you money.
In choosing a business, answer the following questions:
- What are your interests?
- What do you genuinely enjoy doing?
- What are your abilities?
- What do others see as your strengths?
- What has always come easily to you?
- Realistically, how much money do you want to make?
- What type of status do you want to have?
- What is your lifestyle?
- List your expectations
- List your family’s expectation of you
- What are your limitations?
What factors should I consider when setting up an entity in Texas?
This is a key question when deciding to create a business entity. Many
different factors must be considered in order to obtain the best result.
The following are some of the factors that you need to consider:
- The nature of the business
- Barrier to market
- Projected income
- The market
- Type of assets
- The business plan
- Level of control
- Centralized or decentralized management
- Flexibility of objectives
- Short term goals
- Long term goals
- The people involved (employees, management, executives, and/or officers)
- The level of tolerable risk
Who invests in a business?
Typically, investors come in the form of friends and family, individuals
involved in the business, partner companies, venture capitalists, secured
or unsecured creditors, and others.
What are the most common forms of business entity(ies) in Texas?
In Texas, the most commonly used legal structures available are Sole Proprietorships,
General Partnerships, Limited Partnerships, Limited Liability Companies,
and Corporations. Other special purpose entities include Registered Limited
Liability Partnerships, Closely Held Corporations, Cooperative Associations,
Professional Corporations, Professional Limited Liability Companies, Professional
Associations, Non-Profit Corporations, Unincorporated Non-Profit Associations,
What is a sole proprietorship business?
Sole proprietorships do not have a separation between the owner and the
business. Consequently, the owner controls the business. Sole proprietorships
are easy to begin, to work with, and to end. There are no particular state
or federal filings required, other than the protection of intellectual
property marks such as brands and business slogans.
All of the owner’s non-exempt assets are available to the creditors
of the business for 100% of the business’ liabilities, and all of
the business’s assets are available to the creditors of the owner.
Administrative costs of sole proprietorships are the least among all of
the business forms. The lack of a distinction between owner and business
can create problems when it comes time to sell the business, shut it down,
death of the owner, or a divorce proceeding.
What is a general partnership?
A general partnership allows more than one own the right to receive a share
of profits of a business.
A partnership can also be:
- Expression of an intent to be partners in a business.
- Participation or right to participate in control of a business.
- Sharing or agreeing to share losses of a business or liability for claims
by third parties against a business.
- Contributing or agreeing to contribute money or property to a business.
Note that one of the following circumstances alone indicates that a person
is a partner in the business, but several in conjunction with each other
may indicate the creation and existence of a partnership.
What is a limited partnership?
A limited partnership must include at least one general partner and one
limited partner. General partners manage the limited partnership while
bearing 100 percent of the risk of all partnership liabilities, whereas
limited partners do not participate in management or control. Their liability
is limited to the amount of their investment in the limited partnership.
Limited partnerships may be the most preferred business form currently
available in Texas. Their incredible flexibility can be designed and combined
with other Texas business entities in very sophisticated ways to custom
tailor control to the needs of the owners, minimize taxation burdens,
and maximize liability protection.
What is a limited liability company?
Limited liability companies combine certain characteristics of partnerships
with some characteristics of corporations. They were designed to allow
for maximum flexibility by blending the “pass-through” federal
income tax savings inherent in partnerships with the centralization of
management of corporations. Owners of limited liability companies are
Members either exercise all management control of the business themselves,
or they may elect managers who then serve collectively on a board of managers
and manage the affairs of the business.
What is a corporation?
Corporations are very common business organizations. They usually consist
of owners called shareholders, a board of directors, and officers. They
are very flexible organizations from a governance and operations perspective.
Texas law requires a corporation to have a president and a secretary,
who may be the same person.
What is the difference between an S-Corporation and C-Corporation?
Only certain corporations may qualify to be S-Corporations. S-Corporations
can only have 75 or less total shareholders, and as a general rule, every
shareholder must be either an individual U. S. citizen or a qualified
trust. S-Corporations are taxed like partnerships in that they file informational
federal income tax returns and “pass through” their items
of income and expense to their shareholders.
On the other hand, C-Corporations file their own tax returns with the IRS
and pay corporate income tax. Dividends distributed to shareholders are
paid with after-tax dollars and are included in the shareholder’s
taxable income. The shareholder then pays federal income tax on the dividends
received. Money that flows through a C-Corporation is then subject to
taxation at two levels, both the corporate level and the shareholder level.