Lesson 5: Types P2
October 7
Doing Business As (DBA)
Go to each county to do business
Depends on what you’re doing for business
If you’re transacting a sale in that county, then you’ve done business in that county.
If you’re a farmer and go to various farmer’s markets, and go to another county, operate as “Organic Farms” sole proprietorship
If services-based county, and you don’t actually go to Harris County (offices are in Travis County, envoiced and receive money at Travis County)
Traveling and coming back vs actually conducting goods & services there
Good for 10 years, renew them
“Assumed Name” for more formal business corporations, file that with a state
Get an Assumed Name Certificate, allow you to do business in the entire state
Partnership
A partnership is a form of business owned by two or more individuals who share management and profits. There is no limit to how many people can join in a business partnership, but a partnership must be for-profit.
Partnership nonprofit doesn’t exist in Texas legal code.
Can have up to 100 business partners.
Odd number of partnerships are ideal.
“Money covers a multitude of sins.”
Partnership dissolves if one partner can no longer operate.
Advantages: Affordable to start, more available capital, ability to combine skills and resources, good choice for businesses with multiple owners or professional groups (like attorneys)
Disadvantages: Possibilities of disagreements, unlimited liability, limited life
Limited Partnerships (LP)
Only one general partner with unlimited liability
Assets (house, stocks, bank account, warranty collectable, luxury goods) → debt
Criminally liable
Civilly liable - product BPA first class action lawsuit
Personal guarantee: Promise to accept responsibility for other person’s debt
All other partners have limited liability
Partners with limited ability also tend to have limited control over the company, which is documented in a partnership agreement
Not involved in management & day-to-day operations by law
Profits are passed through to personal tax returns, and the general partner must also pay self-employment taxes (Medicare, social security, regular income tax like sole proprietorship)
Biggest advantage: Funding (easier access to capital)
They’re protected and shielded from debt, being sued
Limited Liability Partnerships (LLP)
Limited liability to every owner
Protects each partner from debts against the partnership
Won’t be responsible for the actions of other partners
They’re all paying full taxes
Law firms like this
Corporations
Advantages: Publicly owned, stakeholders, separate legal entity, no liability, capable of raising funds, continued life, many decision makers
Disadvantages: Costlier, double tax, “big business” social reputation, shareholders , loss of control, formation costs
Double tax: Taxed as a corporation and taxed as an individual
Federal taxes, state taxes
$5M - Texas is not gonna make you pay taxes (business-friendly state!)
franchise fee, foreign entity fee to operate in texas
Most complicated form of business ownership is a corporation. Business owned by stockholders, who share in profits and losses. Unlike partnerships and sole proprietorships, a corporation is legally separate from its owners which means the owners of a corporation have limited liability.
In order to pierce that corporate veil, have a high burden of proof (unlawful, against contracts evidence, and intent to cause in negligent or malignant way)
Shares → Dilution
Funding
Writing off expenses
Health insurance
Income tax, capital gains tax
Real estate
Writeoff expenses (deductions, charity as company)
Gross profit drops
October 7
Doing Business As (DBA)
Go to each county to do business
Depends on what you’re doing for business
If you’re transacting a sale in that county, then you’ve done business in that county.
If you’re a farmer and go to various farmer’s markets, and go to another county, operate as “Organic Farms” sole proprietorship
If services-based county, and you don’t actually go to Harris County (offices are in Travis County, envoiced and receive money at Travis County)
Traveling and coming back vs actually conducting goods & services there
Good for 10 years, renew them
“Assumed Name” for more formal business corporations, file that with a state
Get an Assumed Name Certificate, allow you to do business in the entire state
Partnership
A partnership is a form of business owned by two or more individuals who share management and profits. There is no limit to how many people can join in a business partnership, but a partnership must be for-profit.
Partnership nonprofit doesn’t exist in Texas legal code.
Can have up to 100 business partners.
Odd number of partnerships are ideal.
“Money covers a multitude of sins.”
Partnership dissolves if one partner can no longer operate.
Advantages: Affordable to start, more available capital, ability to combine skills and resources, good choice for businesses with multiple owners or professional groups (like attorneys)
Disadvantages: Possibilities of disagreements, unlimited liability, limited life
Limited Partnerships (LP)
Only one general partner with unlimited liability
Assets (house, stocks, bank account, warranty collectable, luxury goods) → debt
Criminally liable
Civilly liable - product BPA first class action lawsuit
Personal guarantee: Promise to accept responsibility for other person’s debt
All other partners have limited liability
Partners with limited ability also tend to have limited control over the company, which is documented in a partnership agreement
Not involved in management & day-to-day operations by law
Profits are passed through to personal tax returns, and the general partner must also pay self-employment taxes (Medicare, social security, regular income tax like sole proprietorship)
Biggest advantage: Funding (easier access to capital)
They’re protected and shielded from debt, being sued
Limited Liability Partnerships (LLP)
Limited liability to every owner
Protects each partner from debts against the partnership
Won’t be responsible for the actions of other partners
They’re all paying full taxes
Law firms like this
Corporations
Advantages: Publicly owned, stakeholders, separate legal entity, no liability, capable of raising funds, continued life, many decision makers
Disadvantages: Costlier, double tax, “big business” social reputation, shareholders , loss of control, formation costs
Double tax: Taxed as a corporation and taxed as an individual
Federal taxes, state taxes
$5M - Texas is not gonna make you pay taxes (business-friendly state!)
franchise fee, foreign entity fee to operate in texas
Most complicated form of business ownership is a corporation. Business owned by stockholders, who share in profits and losses. Unlike partnerships and sole proprietorships, a corporation is legally separate from its owners which means the owners of a corporation have limited liability.
In order to pierce that corporate veil, have a high burden of proof (unlawful, against contracts evidence, and intent to cause in negligent or malignant way)
Shares → Dilution
Funding
Writing off expenses
Health insurance
Income tax, capital gains tax
Real estate
Writeoff expenses (deductions, charity as company)
Gross profit drops