Assisting Owners With Formation of LLCs in the Houston Area
One of the first decisions you may have to make as a business owner is which formal entity, if any, is right for your company. You may continue operating as a sole proprietor or general partnership without taking any formal steps to register your business. However, this is often not the best option for multiple reasons. When you look into the possibility of other entities, you may be overwhelmed by the options for a corporate structure.
Limited liabilities companies, or LLCs, have become increasingly used business entities for entrepreneurs across a wide range of industries, and it is easy to see why. They offer many of the protections of a traditional corporation with the flexibility of a partnership. In addition, LLCs are not subject to the more onerous filing and reporting requirements to which corporations are.
Many entrepreneurs and business people wonder if they need to employ the assistance of an attorney in order to start an LLC. While there is no legal requirement to use an attorney when starting an LLC, it is highly advisable to do so. At the Weisblatt Law Firm, LLC, we regularly help all types of business owners decide whether forming an LLC is right for them, as well as navigate every step of the formation process. Call today for more information.
Benefits of an LLC
Statistics indicate that about 3,158,800 people work in nonfarm businesses in the Houston area. While a number of these businesses are corporations or even Fortune 500 companies, many are smaller operations and LLCs. Houston company owners routinely select to form limited liability companies because of the many benefits this entity can provide. The following are only some of these advantages:
- Limiting personal liability – When you have a general partnership or a sole proprietorship, there is no legal distinction between you and your business. This means that owners will be personally responsible for business debts or that your personal property or assets may be at risk if you face a legal claim. Once you form an LLC, the business is seen as a separate legal entity, which shields you from personal liability in most situations.
- Fewer formal requirements – While a corporation will also protect your personal assets, forming and maintaining a corporation requires many more steps than an LLC. You must file a number of initial and annual corporate documents and reports, hold annual meetings of shareholders, keep specific records, pay annual fees, and more. Aside from the initial paperwork, an LLC does not have most of the requirements of corporations.
- Flexible tax options – Sole proprietors and partnerships enjoy pass-through taxation, so owners do not pay double taxes. Many corporate owners, on the other hand, are taxed on both the individual and corporate levels. LLC owners have the option whether to use pass-through taxation or elect to pay taxes as a corporation, depending on the circumstances of the business.
- Fewer restrictions – S corporations have many restrictions, including the number of shareholders they can have and the identity of shareholders. LLCs have no restrictions on ownership, including the number or type of owners they may have. Unlike corporations, LLCs do not have to have a specific management structure including officers and a board of directors. LLC owners can structure their leadership as they wish. Finally, LLCs have more flexibility in profit-sharing, as owners do not have to distribute profits in direct accordance with ownership percentage.
The above are only some of the many reasons you may want to form an LLC. If you decide this entity is right for you, the following are some reasons why you should contact an experienced Houston business attorney for assistance.
An Attorney Will Ensure Your Filing Complies With State Law
State law governs the creation of LLCs. To establish one, you must file certain paperwork with the Texas Secretary of State (SOS) office. Incomplete or erroneous paperwork can result in the rejection of your filing and create unnecessary delays in getting your business up and running.
An attorney can assist you in completing the certificate of formation you will need to file with the SOS. They can also help you select your designated registered agent, which is the party who must reside in Texas and who will accept legal notices, SOS communications, service of process, and other official documents on behalf of the business. Finally, you will want to register the name of your business with the SOS. Our attorneys can help determine whether a business name is available, make a name reservation if needed, and register the final name. Our law firm will ensure you take all necessary steps to properly form your LLC and get up and running.
A Lawyer Will Help You Establish an Operating Agreement as You Form an LLC
An LLC’s operating agreement is perhaps the most important document associated with starting a business. It outlines the way in which the LLC will be organized and establishes the rights and responsibilities of the members towards each other and the organization itself. While Texas law does not require that owners file an operating agreement with the state, it is extremely important for the operating agreement to accurately reflect the agreement between the members and the way they intend to run the LLC.
Too many LLC owners fail to create an operating agreement only to run into serious conflict or liability issues down the road. The following are some reasons why you should have a skilled attorney draft your LLC operating agreement:
- If you are a one-owner LLC, an operating agreement can give credibility to prevent any liability questions
- Set out how owners will share decision-making responsibilities
- Set out how owners will share profits and losses
- Buy-sell provisions in case one owner’s interests are at risk
- Determine how you will resolve owner disputes
If you do not have an operating agreement, state law will govern how you run your LLC and resolve disputes. It is better to have your own well-crafted agreement than default to state law.
An Attorney Will Make Sure That You Follow the Necessary Formalities to Protect Yourself From Liability
As mentioned above, one of the main benefits of an LLC is the liability protection it provides its members. This means that the members of the LLC will not be personally liable for any debts incurred by the business. This is only the case, however, if LLC owners observe certain formalities. The assistance and advice of an attorney will ensure that you follow the necessary formalities in order to protect yourself from personal liability.
An LLC is a separate legal entity from its owners only if the owners treat it as such. This means keeping separate accounts and records, not using business equipment for personal use, having and following a specific management structure, and more. If you fail to treat the company as a separate entity, creditors or plaintiffs in legal judgments may be able to “pierce the corporate veil” and go after owners’ personal assets. Many missteps can result in your personal assets being at risk even after forming an LLC, and the advice of the right lawyer can help you prevent this from happening.
Ongoing Legal Assistance When You Form an LLC in Texas
Once you file the necessary paperwork, register a business name, sign an operating agreement, and take other steps to formalize your LLC, there will still be a number of legal issues to address, often on an ongoing basis. For many LLCs, it does not make sense to hire in-house counsel to assist with legal questions as they arise. The Weisblatt Law Firm gets to know the business of our clients so we can be there when concerns arise. We can help with contract drafting, employment matters, business transactions, and much more. We know Texas business law and can help ensure your company is in compliance to prevent any problems down the road. These are only some of the many ways we can consistently provide legal assistance for your LLC.
Contact a Houston Business Formation Attorney Today to Discuss Your Situation
If you are considering forming an LLC or are unsure of what business entity would best suit your needs, you should talk to an attorney who specializes in business formation as soon as you can. To schedule a case evaluation with a Houston business lawyer, call The Weisblatt Law Firm, LLC, today at (713) 352-0847 or contact us via our online form. The firm regularly assists companies of all types and sizes, from startups to well-established entities. Schedule your appointment to learn more about our business services.