Starting a new business is incredibly exciting, but without a proper foundation, business owners can find success difficult. One of the most difficult decisions a business owner can make is selecting what type of business entity to form. There are many considerations to evaluate when choosing an entity type, so it’s best to consult with an experienced Amarillo business formation attorney to make sure you are creating a solid foundation for future business success.

Choosing The Right Entity

Many people choose their business entity based on the price it costs to form, but the reality is that saving a little money in the present could end up costing you a fortune in the future. While there are a number of different entities to choose from, the three most commonly used entity types are Limited Liability Companies (LLCs), Sole Proprietorships, and Corporations.


LLCs are one of the most popular forms of business entity. When you create an LLC, the owner or owners cannot be held personally responsible for the debts of the business (that’s where the “limited liability” comes from). With LLCs, you can also choose at which level you want the Internal Revenue Service (IRS) to tax your profits – at the business level or the personal level. On the downside, LLCs are more expensive to form than sole proprietorships because registration is required with the state of Texas (or the state of the business’s residence).

Sole Proprietorships

Sole proprietorships are popular because they are easy to set up and registration is not required by the state. However, sole proprietorships do not separate the owner from the business. This means liabilities, debts, and taxes can impact the personal finances of the owner. For example, if a sole proprietorship takes on debt, the owner’s possessions, including cars, homes, and other assets, can be confiscated to cover the debts. Additionally, it can be difficult to secure a loan for this type of entity because the liability is assigned to one person, rather than an entire business.


Corporations provide the same limited liability as LLCs, but with significantly more strings attached. Corporation must follow specific additional regulations. Corporations are ruled by boards of directors and must hold regular shareholder meetings, take minutes of meetings, and create bylaws for their company. On the flip side, corporation status can be extremely beneficial when raising revenue, attracting investors, and obtaining tax deductions. Your entity can choose from several forms of corporations, and choosing the right one will impact your business’s future goals.

Amarillo Business Formation Attorney

Freeman & Nance can help you choose the right business format to start your company off on the right foot. Contact us today to schedule an appointment with one of our knowledgeable Texas business attorneys.

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