Entity formation is a core aspect of starting a business. Unfortunately, many clients underestimate the importance of well-considered business formation. The act of formally creating a business entity can have significant ramifications for tax liabilities, potential asset risks, and investment opportunities, and working with an experienced business formation attorney will ensure that these issues are thoroughly investigated and that a personalized business formation strategy will be developed for the benefit of your business.
Berg Plummer Johnson & Raval, LLP has worked with numerous clients in developing a business formation plan, from individuals to small partnerships to global, Fortune 500 companies. If you have any questions or concerns about business entity formation, an experienced Houston business formation lawyer here at Berg Plummer Johnson & Raval, LLP will assess your objectives and guide you along the process of forming an entity that meets the desired criteria.
Business Formation Considerations
When forming a business entity in Texas (or elsewhere), there are a number of obvious and non-obvious considerations that you will want to address with your attorney.
The entity structure that you establish for your business is a critical decision that will affect the administration of your business, procedure, tax liability, personal liability of owners and employees, investment procedure, and more. Popular entity forms include but are not necessarily limited to: sole proprietorships, partnerships, limited partnerships (LLP), corporations, limited liability corporations (LLC), C-corporation, S-corporation, and more.
State of Incorporation
You are not required to incorporate in the state of Texas — in fact, you may choose to incorporate in any state. Each state has various advantages and disadvantages in this regard. Many clients choose to incorporate in Delaware, for example, because its laws are friendly to corporations, its extensive, well-developed body of corporate case law makes litigation more predictable, and its tax policies can be favorable.
Leadership positions (i.e., the board of directors, officers, etc.) must be filled by persons who do not have a conflict of interest in representing the interests of investors, shareholders, and the company itself. Self-dealing must be avoided, and transactions must be assessed to ensure that there is no self-dealing or other potential conflict of interest.
Drafting Formation Documents
Depending on the entity form you choose to establish, your attorney will have to draft different business formation documents. These documents govern the day-to-day and long-term administration of your business. If you are forming a corporation, your attorney draft articles of incorporation, corporate bylaws, and other documents that contain the requisite provisions necessary to achieve your various business formation and future administrative goals.
Shares and Ownership
If ownership shares are being distributed, then you attorney will have to draft documentation (i.e., a shareholder agreement) that creates the desired classes of shares, describes the voting rights, vesting schedule, responsibilities, and other duties imposed on shareholders, and outlines the procedures for investment and selling private shares to third-parties.
Depending on the business entity type, you will have different procedural requirements to satisfy. For example, if you form a C-corporation, then you must keep minutes of annual investor meetings. At Berg Plummer Johnson & Raval, LLP, our attorneys have served as advisers for numerous enterprises, and can help you understand the extent of your procedural responsibilities and how to comply with such responsibilities.
At Berg Plummer Johnson & Raval, LLP, our lawyers have decades of combined experience helping Houston-area businesses (as well as businesses throughout Texas) navigate the complicated issues associated with business formation, from minimizing potential liabilities to establishing an entity that is tailored to the client’s intended administrative and investment structure.
Particularly with regard to business formation services, clients are often concerned about their budget. At Berg Plummer Johnson & Raval, LLP, we work closely with our clients to ensure that our budget expectations are aligned and that there is a customized fee arrangement in place that is satisfactory for all involved.