understanding business structures in texas

When starting a business in Texas, choosing the right legal structure is crucial. The business structure you select will have implications on various aspects of your operations, including taxation, liability, ownership, and management. Understanding the different business structures available in Texas will help you make an informed decision that aligns with your goals and priorities.

Sole Proprietorship

A sole proprietorship is the simplest form of business structure. It is an unincorporated business owned and operated by a single individual. As a sole proprietor, you have complete control over your business but are personally liable for its debts and obligations.


A partnership is a legal structure where two or more individuals or entities share ownership and responsibility for a business. There are two common types of partnerships in Texas:    

General Partnership: In a general partnership, all partners have equal management authority and share liability for the partnership's debts and obligations.

Limited Partnership: A limited partnership consists of general partners who manage the business and have personal liability, and limited partners who contribute capital but have limited involvement in management and liability.

Limited Liability Company (LLC)

A limited liability company (LLC) is a popular business structure that combines the benefits of both partnerships and corporations. It offers limited liability protection to its owners (known as members) while allowing flexibility in management and taxation. In Texas, LLCs are governed by the Texas Business Organizations Code (BOC).


A corporation is a separate legal entity that offers limited liability protection to its shareholders. Texas law recognizes different types of corporations, including:

C-Corporation: A C-corporation is a distinct legal entity with its own rights and liabilities. It is subject to double taxation, as profits are taxed at both the corporate and individual shareholder levels.

S-Corporation: An S-corporation, also known as a "pass-through entity," allows profits and losses to flow through to the shareholders' personal tax returns, avoiding double taxation. To qualify for S-corporation status, certain eligibility requirements must be met.

Nonprofit Organization

A nonprofit organization is established for charitable, educational, religious, or other specific purposes. It operates with a mission to serve the public interest rather than generating profits. Nonprofits in Texas must adhere to specific legal requirements to obtain tax-exempt status and maintain compliance with state regulations.

Choosing the right business structure depends on various factors, including the nature of your business, liability concerns, tax considerations, and long-term goals. It is recommended to consult with a qualified business attorney or professional to evaluate your specific needs and make an informed decision.

Remember, each business structure has unique advantages and disadvantages, and the information provided here is a general overview. For personalized advice and assistance, contact Vargas Law Firm, where our experienced team can guide you through the process and help you establish a solid legal foundation for your business.