Essentially, there is a choice of at least six different business entities in Texas that are able to serve as your medium for your commercial venture. Other than the six basic entities, if you are a doctor, lawyer, or engineer, there are additional mediums for your commercial venture (the professional association, the professional corporation, the registered limited liability partnership, etc.) that you may use or may be required to use. For the purposes of this web site, let’s stick to the six basic ones:

• The Sole Proprietorship
• The Subchapter C Corporation
• The Subchapter S Corporation
• The General Partnership
• The Limited Partnership
• The Limited Liability Corporation

Which one should you choose? Frankly, it would be difficult to answer that question within the boundaries of this web site. Each entity listed above has its own advantages and disadvantages in protecting owners from creditors and claimants, tax laws, flexibility within the operation and matters upon dissolution. Your choice of entity will depend on a number of matters unique to your situation including:

The degree of protection you would like from personal liability for business operations and debts;
The tax treatment you would like for yourself and the business to receive during its operation;
Whether you would like to channel the profits and losses directly through to yourself, or hold them in the business;
Your overall business plan (e. g., is this a sales or service oriented business, is it going to be a stand alone business, or own other business etc.);
The importance of having a long term continuity of ownership and control by a small group—a family or a close knit group of owners;
Your exit strategy - do your plans include the ownership of this business for a long time, as a career, or are you developing it as an investment, one that you would consider reselling in the future - and the tax treatment you would like to receive once you depart from your endeavors in the entity.

Serious thought must be given to each of the above issues before forming your business. A consultation with your accountant or tax specialist for financial and tax planning input is also advisable along with speaking to an attorney to discuss how that fits into your overall plan so that, together, you can select the medium that will accomplish your plan in the best way.