You have many things to consider if you plan to start a new business. Even if you are confident about the name, funding plan, and organizational structure, you will need to select the type of business you want to create. There are different types of legal entities in San Antonio, and choosing the right one is important.
Most people have two major considerations when they select a type of business structure: personal liability and tax obligations. Tradeoffs exist with all of the available options, but a dedicated business attorney such as Sasha Begum could help you find the right path.
The simplest type of business structure to adopt in San Antonio is the sole proprietorship. There are no formal steps to create a sole proprietorship, as it is simply one person doing business in their own capacity without a formal organization around them. While this is the easiest way to get started, the major downside is that proprietors are not shielded from liability for claims against the business. That means the owner could end up using their personal assets to pay for any injury claims or debts.
Another company type available for investors in San Antonio is partnerships, which are essentially the same as sole proprietorships, with one important difference. These companies involve two or more owners, but there is no formal structure to speak of. Often, the parties will draft a partnership agreement, which is a contract establishing the extent and nature of the relationship. Either way, partners are not shielded from liability when the company is sued.
Corporations are ideal for larger companies, and they have the potential to eventually become publicly traded. However, there are multiple subtypes of corporate entities to be aware of. Corporations are independent entities that are legally separate from their owners, which differentiates them from sole proprietors and partnerships. The owners—known as shareholders—can be a handful of people or thousands of members of the public, depending on the circumstances.
In San Antonio, each type of legal entity has its own benefits and drawbacks. There are a few benefits that come with operating a corporation. They are designed for a large number of owners, and transferring ownership is fairly simple. They also limit personal liability, meaning that shareholders are not personally responsible for tort claims or debts facing the company.
One of the biggest downsides to forming a corporation is related to taxation. Traditionally, the income from a corporate entity is taxed twice: once at the company level and again when it is earned by shareholders. That is how it works with the traditional C-corporation. However, there is also a subtype known as an S-corporation to consider. With an S-corporation, the profits and losses pass through the business directly to the shareholders. This means the income is not taxed twice.
Limited liability companies—or LLCs—offer many of the benefits of the other types of entities without all of the drawbacks. That does not mean it is the perfect solution for every situation, however. There are reasons why LLCs are one of the most popular types of San Antonio legal entities.
LLCs protect their owners, who are known as members, from liability. They are also pass-through entities like partnerships, meaning members will not be taxed twice for their income. Setting up this type of business is more complex than some other options, and there is a limit on the number of potential owners.
If you plan to open a business but you cannot decide which type to choose, you do not have to decide alone. Reach out to Begum Pelaez-Prada, PLLC today for a private consultation. We could help you choose from the different types of legal entities in San Antonio and the surrounding areas, including Dreamhill Estates, Los Jardines, Olmos Park, Prospect Hill, Terrell Hills, and Tobin Hill. Each option has its own benefits and drawbacks, and choosing the right one will depend largely on your goals.
