One of the first decisions you have to make when starting a business in Texas is which business form you will use. There are a few options, and each one has specific requirements, benefits and characteristics. According to the Texas Secretary of State, there are five main business form options.

A common choice, if you are opening a business on your own, is a sole proprietorship. The main requirement is one business owner. You also carry the business liability as a personal liability.

If you and someone else or a group want to start a business together, you could form a general partnership or a limited partnership. Any form of partnership requires a formal partnership agreement. With a limited partnership, you would have general and limited partners. Limited partners have a limited liability in the business.

If you want to limit your personal liability, you may form a corporation or a limited liability company. A corporation is its own entity. The corporation pays you from the profits instead of you earning the profits directly. A board makes decisions for the business. It also must have shareholders. An LLC is a mix of a corporation and a partnership. It limits liability based on how much you invest in the business.

Choosing your business form is an important decision. It decides how you run your business, what types of formal documents you must file with the state and who runs the business. It requires some thought on how the choice will impact your business now and in the future. This information is for education and is not legal advice.