Houston Business Formation Lawyer Services

Which Business Entity Should I Form for
​My New Small Business in Houston?

When people ask whether they should form an LLC or a corporation, many times they don’t understand the distinction between the legal structure vs. tax treatment of these two entities, or blend them together in their minds.  

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It is for this reason that working with a Houston business lawyer who helped many other businesses launch in Houston is critical.

For the majority of people and business efforts, the legal distinction between an LLC or a corporation is not and should not be the determining factor (although LLCs do offer more flexibility in management and decision making than corporations). 

Both allow for liability protection and both allow for separation between personal assets vs. business (the entity’s) assets.

The more important factor to consider and understand is the different tax treatments available to these entities. 

The primary question to ask is whether the entity should be treated as a pass-through entity,  partnership, c-corporation or s-corporation for federal tax purposes?  

The entity’s business, capital formation methods, owner/investor profiles, etc. should all be considered in determining which tax treatment is most suitable. 

This determination needs the collaboration of both a knowledgeable lawyer and a CPA or tax advisor.

Once this determination is made, then the answer to whether the entity should be an LLC or corporation becomes a lot easier to decide.