How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask TexLaw Your Own Question
TexLaw
TexLaw, Attorney
Category: Legal
Satisfied Customers: 4430
Experience:  Lead trial/International commercial attorney licensed 11 yrs
17219180
Type Your Legal Question Here...
TexLaw is online now
A new question is answered every 9 seconds

I am setting up a consulting company with a friend in Texas,

This answer was rated:

I am setting up a consulting company with a friend in Texas, and we both want to be in full control of the company (we will be doing engineering services). Even though our work with have limited exposure to liability, we still want our personal assets to be protected.

Can you please advise which corporate structure would best suit us, and describe the tradeoffs between the various options (LP, LLP, LLC, S-Corp)? We would like to know how each type affects liability, control of the company (remember, we both want to have equal control), tax advantages/disadvantages, and general level of initial and ongoing paperwork that must be filed for each.

Also, we plan on having employees at some point if that affects the decision we should make now.
Hi,

Thanks for your question.

All the various forms will protect you from personal liability if established correctly. However, they very greatly in purpose and tax effects.

Your best option is going to be an LLC in which you are both 50% owners and managers. The LLC form will allow you to have "pass through" taxation and has very low regulatory and tax compliance costs.

A limited liability partnership and Limited partnership both require general partners which means you have to set up a different entity to be the general partner and the compliance and regulatory costs go up.

An S Corp would be the type of form you use if you had many more investors and needed to be able to transfer shares in the company. That doesn't sound like the situation here.

An regular C corp would be what you would want to eventually switch over to eventually if you are earning more than $500K per year, as there are different tax advantages that you can take at that point which will be help reduce your tax liability. However, unless your revenue is over $500K, the tax advantages are not going to be big enough to cover the costs of compliance/accounting and the time it takes.

An LLC is the way to go. There are LLC forms that you can fill out and file with the Texas Secretary of State at the following website:

http://www.sos.state.tx.us/corp/forms_boc.shtml#fbenc

The LLC will only have a franchise tax statement which needs to be filed each year and a tax return. Other than that, there is not much in the way of yearly paper work.

Please let me know if you have any questions. Please also kindly consider rating my answer positively so that I am compensated by the website for my work on your question. Rating does not cause an additional charge and will not prevent us from further working together on your questions.

Best Regards,
ZDN
TexLaw and 4 other Legal Specialists are ready to help you