Need Help With a Start-Up or Re-Organization
Successful business start-ups and re-organizations are the lifeblood of the American economy. It can be quite challenging, however, to start a business organization from the ground up and see it grow and become a thriving entity. To do so requires vision, sacrifice, dedication and more than just a little luck. The Butler Firm in Austin, Texas provides the business legal services you need to see you through this unique experience.
Trust in Experienced Austin Business Law Attorney
At The Butler Firm, our business lawyers will help you turn your vision of a healthy and thriving company by providing you with the legal tools you need to thrive well beyond tomorrow. We can help in most areas including
- Business Operating Agreements
- Governance Requirements
- Family Business Issues
- Formation of corporations, limited liability companies, partnerships, limited liability partnerships, professional limited liability companies, and sole proprietorships
- Officer-Director liability issues
Which Entity Type is Best for Your Austin Business Needs
- Sole Proprietorship
The sole proprietorship is the simplest business form under which one can operate a business. A sole proprietorship is not a legal entity. It is simply an enterprise that is owned and operated by an individual. It is the easiest type of business to establish-no state filing or agreement with other owners is required. By default, once an individual starts selling goods or services, he or she has created a sole proprietorship.
A sole proprietorship is not legally separate from its owner. The law does not distinguish between the owner's personal assets and the business' obligations.
A sole proprietor's assets can be (and often are) used to satisfy the business' debts. Consider this before selecting a sole proprietorship as your business form. Accidents happen. Businesses go out of business all the time.These unfortunate circumstances may quickly become
a nightmare for its owner.
- General Partnership
A partnership is a business form created automatically when two or more persons engage in a business enterprise for profit. A general partnership is the simplest variety of partnership. By default, a business that begins with a verbal agreement or handshake is considered a general partnership. In a general partnership, all partners share in the management of the entity and share in the entity's profits. Matters relating to the ordinary business operations of the partners are decided by the partners. A formal, written partnership agreement that sets forth all the partners' rights and responsibilities is always highly recommended; oral partnership agreements are fertile ground for disputes among partners.
A general partnership offers no liability protection to its owners-the general partners are all liable for the debts and obligations of the general partnership. This means that a general partner's personal assets can be used to satisfy the business debts of a general partnership.
- Limited Partnership
A limited partnership (LP) is a variety of partnership owned by two classes of partners: general partners and limited partners. General partners manage the enterprise and are personally liable for its debts. Limited partners contribute capital and share in the profits, but typically do not participate in the management of the enterprise. Another notable distinction between the two classes of partners is that limited partners incur no personal liability for partnership debts beyond their capital contributions.
In an LP, at least one partner must be a general partner with unlimited liability, and at least one partner must be a limited partner whose liability is limited to the amount of his or her investment. Limited partners enjoy liability protection much like the shareholders of a corporation or the members of a limited liability company (LLC).
An LP allows for pass-through taxation, as its income is not taxed at the entity level. Limited partners can use losses to offset other passive income on their tax returns. General partners' losses can be used to shelter other income up to the value of their investment in the partnership, since their losses are not usually considered passive. LPs have been largely eclipsed by the development of the more versatile LLC.
To form an LP, the LP's organizers must file appropriate formation documents with their state's business chartering agency and must pay a required filing fee. The LP organization is especially appealing to types of businesses where a single, limited-term project is the focus (such as real estate or the film industry). LPs can be used as a form of estate planning in that parents can retain control of their business while transferring shares to their children.
- Limited Liability Partnership (LLP)
A limited liability partnership (LLP) is a hybrid business form that shares attributes of partnerships and limited liability companies (LLCs). An LLP is an entity comprised of licensed professionals, such as attorneys, accountants, and architects. The partners in an LLP may enjoy personal liability protection for the acts of other partners (but each partner remains liable for his or her own actions). State laws generally require LLPs to maintain generous insurance policies or cash reserves to pay claims brought against the LLP.
The LLP form is appealing to licensed professionals that are prohibited from operating under an LLC or corporation-professionals such as accountants, attorneys, and architects. An LLP also allows for pass-through taxation, as its income is not taxed at
the entity level.
To form an LLP, the LLP's organizers must file appropriate formation documents with their state's business chartering agency and must pay a required filing fee.
The standard corporation, also called a C corporation, is the most common and reliable business structure. A corporation is a separate legal entity owned by its shareholders. As a result, it protects its owners from personal liability for corporate debts and obligations.
A corporation's shareholders, directors, officers, and managers must observe particular formalities in a corporation's operation and administration. For example, decisions regarding a corporation's management must often be made by formal vote and must be recorded in the corporate minutes. Meetings of shareholders and directors must be properly noticed and must meet quorum requirements. Finally, corporations must meet annual reporting requirements in their state of incorporation and in states where they do significant business.
Taxation is a significant consideration when choosing a business structure. A C corporation is taxed as a separate legal entity (i.e., no "pass-through" taxation like a partnership). If the corporation distributes profits to the shareholders in the form of dividends, shareholders pay income tax on those distributions; thus, commentators criticize C corporations as imposing "double taxation."
As with any business entity that offers liability protection to its owners, a corporation must file a charter in its home state. A corporation begins its life by filing articles of incorporation (sometimes called a certificate of incorporation) in the appropriate state and paying the necessary filing fee.
- S Corporation
An S corporation is a standard corporation that has filed for S corporation status with the Internal Revenue Service (IRS). The S corporation's tax election adopts pass-through taxation-thereby sidestepping the double taxation burden borne by C corporations.
S corporations file an informational tax return (much like a partnership) but the entity pays no tax. The shareholders report their share of the S corporation's profit or loss on their individual tax returns.
- Limited Liability Company
The limited liability company (LLC) is often described as a hybrid business form. It combines the liability protection of a corporation with the tax treatment and ease of administration of a partnership. The LLC is America's newest form of business organization; the great bulk of laws authorizing LLCs in the United States were passed in the 1980s and 1990s. The watershed event in the rise of the LLC was a 1988 IRS ruling that recognized partnership tax treatment for LLCs. Within 6 years, 46 states authorized LLCs as a business form.
LLCs enjoy pass-through taxation-thereby sidestepping the double taxation burden borne by C corporations. LLCs file an informational tax return (much like a partnership) but the entity pays no tax. The members (owners) report their share of the LLC's profit or loss on their individual tax returns. A note-of-caution, some states including Texas have reformed their tax laws to include a Franchise Tax for LLC's and PLLC's on profits over a certain amount.
LLCs can be formed only through filing a charter document (typically called articles of organization) in the appropriate state and paying the required filing fee.
- Professional Limited Liability Companies
Professional limited liability companies (PLLCs) are specialized entities organized and operated solely by licensed professionals such as attorneys, accountants, and architects. The members (owners) of a PLLC may enjoy personal liability protection from the acts of other members, but each member remains liable for his or her own professional misconduct. Not all states recognize the PLLC business form.
Some State laws generally require PLLCs to maintain generous insurance policies or cash reserves to pay claims brought against the corporation.
PLLCs are formed in a similar manner to standard corporations and LLCs by filing formation papers with the appropriate state agency and paying the necessary filing fee.
- Professional Corporation
Professional corporations (PCs) are specialized entities organized and operated solely by licensed professionals such as attorneys, accountants, and architects. The shareholders of a PC may enjoy personal liability protection from the acts of other shareholders, but each shareholder remains liable for his or her own professional misconduct.
Not all states recognize the PC business form.
Some State laws generally require PCs to maintain generous insurance policies or cash reserves to pay claims brought against the corporation.
PCs are formed in a similar manner to standard corporations and LLCs, by filing formation papers with the appropriate state agency and paying the necessary filing fee.
- Nonprofit Corporation
A nonprofit corporation is an entity formed for purposes of pursuing a matter of public concern for non-commercial purposes. Nonprofit corporations are authorized by different statutes than standard for-profit corporations; however, the process of forming a nonprofit is closely parallel. Nonprofit corporation organizers must file nonprofit articles of incorporation or a certificate of incorporation with the appropriate state agency and pay the required filing fee. The formation documents must include certain clauses and information, such as a very detailed business purpose statement, in order for the entity to qualify for tax-exempt status.
To pursue tax-exempt status, nonprofits must apply for federal and state (if applicable) tax-exempt status. Tax-exempt status is not automatically granted upon formation. To apply for federal tax-exempt status, a nonprofit must file Form 1023 with the IRS. For state requirements, it is best to contact the department responsible for taxation in the nonprofit's state of formation.
Like standard for-profit corporations, nonprofits provide limited liability protection. The personal assets of the directors, officers and members typically cannot be used to satisfy the debts and liabilities of the nonprofit.
The most common type of nonprofit is the 501(c)(3), meaning it is formed in compliance with Section 501(c)(3) of the Internal Revenue Code. These nonprofits are organized and operate for a religious, educational, charitable, scientific, literary, testing for public safety, fostering of national or international amateur sports, or prevention of cruelty to animals or children purpose as permitted under this section of the Internal Revenue Code. Nonprofits may also be formed for other purposes pursuant to different sections of the Internal Revenue Code. For example, business leagues, chambers of commerce, and real estate boards are formed under Section 501(c)(6) of the Internal Revenue Code, and a cooperative hospital service organization is formed under Section 501(e).
Working Hard to Meet Your Goals
We know that you want to find a solution to your legal concerns as quickly and affordably as possible. And we're here to help. We will be your strongest advocate at every stage.
Call 512-322-5367 or e-mail us to schedule a free consultation. We will listen to your concerns and give you our honest opinion about your case. If you decide to have the Butler Firm represent you, we will never backdate your bill to include this first meeting.
Our office is located in downtown Austin in the historic Littlefield Building. We are open 8 to 5, Monday to Friday, with meetings at other times and locations available by appointment. For your convenience, we accept credit cards.