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WHY DOES MY BUSINESS STRUCTURE MATTER?

On behalf of Pakis, Giotes, Burleson & Deaconson, P.C. July 24, 2019

When you start a business, you want to find ways to maximize the potential upside. Find a good location. Find a good price. Do your research. Match your business to the interests of a growing community.

You’ll also want to choose the right structure for your business. If you plan to join the new business owners flocking to Waco in the wake of the Fixer Upper transformation, you’ll want to make sure your business structure will offer you the safety and flexibility you need.

Plan for The Future, Not for The Present

There’s plenty to do when you’re just getting started, and choosing a legal business structure might not feel as important as nailing down your business plan and finding a storefront to rent. However, choosing the right business structure may spare you from some serious headaches down the road.

There are pros and cons to each of the different business structures available in Texas, but they all share some similar concerns:

  • Paperwork and ease of use. The business structure you select will affect the amount of paperwork you have to file each year. A sole proprietorship needs the least paperwork. Corporations need considerably more.

  • Tax implications. Your choice of business structure will also come with tax consequences—both in terms of the tax documents you’ll need to file and the amount you’ll owe.

  • Administrative costs. Certain business structures cost more to form and hold together. With some structures, you may also need to dedicate time toward compliance issues.

  • Investment and expansion. You may find it easier to raise capital with some business structures than with others. If you aim for rapid growth and expansion, forming your business as a corporation could allow you to sell stock and lure investors.

  • Liability. This is a big one. While the simplest structures may be easier to form and run, they can leave you exposed to financial and civil claims against your assets. Incorporating your business can help protect your personal assets from a wide range of unforeseen turbulence.

  • Change of ownership. Someday you may wish to retire or sell your business for a profit. Your choice of business structure might affect your ability to transfer the business neatly.

Get It Right

You know best how you want to run your business. Just remember that the structure you choose now will come with massive consequences. It is possible to change your business structure in the future, but it’s far easier to get it right at the outset. It’s worth taking your time, thinking carefully about where you want to end up, and selecting the structure that best helps you get there.