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Advantages and drawbacks of the Texas sole proprietorship

Posted by Chris Peterson | Feb 13, 2013 | 0 Comments

Advantages and drawbacks of the Texas sole proprietorship

If you are starting a business in Texas, one decision you will need to make is what form of business organization to use.  A Bryan-College Station Texas business attorney can help you analyze your situation so that you choose the most appropriate business structure.

One common business structure for new businesses is the sole proprietorships. The sole proprietorship is the simplest form of doing business in Texas.  A sole proprietorship is a business that is owned by one person.  If your business will have more than one owner (other than your spouse), you will need to consider a partnership, corporation, or limited liability company.

How to form a sole proprietorship

The principal advantage of a sole proprietorship is that it is inexpensive and easy to form.  In fact, if you are operating a business as a single person, you are already a sole proprietor.  You don't need any formal documents or state filings.  If you are using a name for the business other than your last name, you will need to file an assumed name certificate (DBA) in the county where your business premises are located.  If your business does not have a fixed location, you will need to file an assumed name certificate in all counties where you do business.

Personal liability

The main disadvantage of doing business as a sole proprietor is that you are personally liable for the debts of the business.  If your business does not earn enough money to pay its bills and debts, your creditors can sue you and can enforce a judgment against your non-exempt assets.  Because of this exposure, it's important for you to purchase adequate liability insurance.  It's a good idea for you to find a knowledgeable insurance agent to analyze your business and advise you on your insurance needs.

Nonetheless, a sole proprietorship may be a good initial choice for your small start-up business if there is little likelihood you will be sued and you do not need to raise much capital.  Later, as your business grows, you can consider forming a corporation or an LLC to provide you with limited liability.

For guidance establishing your Texas small business

The Bryan-College Station Texas business attorneys at the Peterson Law Group will be happy to meet with you to discuss the legal needs of your new business.  Phone 979-703-7014 to schedule a consultation.

About the Author

Chris Peterson

Chris Peterson is the owner of Peterson Law Group. He practices primarily in the areas of wills, trusts and estate planning; probate and trust administration; elder law; and business law. Chris is also the owner of Brazos 1031 Exchange Company.


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