Business Entity Types
What is the best type of business entity for my business?
Each type of entity, whether it be a corporation, limited liability company, limited partnership or other business form, has its advantages and disadvantages. An overview of some of the characteristics of the more frequently used entities is listed below.
| Business Entity | Liability of Owners | Other Characteristics |
| Sole Proprietor: | Unlimited liability for business debts. | No organizational costs. No special record keeping requirements. |
| Limited Liability Company (LLC), Professional LLC: | No personal liability for members (owners) for business debts, except by contractual guarantee. | Maximum flexibility in management, financial structure, and federal taxation but must pay Texas franchise tax; $300.00 filing fee for Secretary of State. |
| Corporation; Professional Corporation: | No personal liability for shareholders for business debts except by contractual guarantee. | Managed by Board of Directors, with shareholder approval required for certain major decisions. Subject to somewhat greater financial and management restrictions than LLC’s; $300.00 filing fee for Secretary of State; must pay Texas franchise tax. |
| General Partnership; Limited Liability Partnership: | Partners have personal liability for partnership obligations, except in a limited liability partnership requiring annual registration and maintenance of insurance. | All partners have equal management and ownership unless otherwise agreed. Law requires limited liability partnership to maintain insurance and register annually. |
| Limited Partnership: | General partner has personal liability. Liability of limited partners is limited to their respective investment in the partnership. | Managed by general partner(s), except for acts requiring consent of the limited partners. |
This chart lists the more common entities and is not comprehensive.
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