A crucial part of starting a business is deciding which type of business entity to create. Each business entity has unique characteristics that should be considered.
The Texas Business Organizations Code allows groups of professionals to operate their practices as LLPs, limited liability partnerships, or PLLCs, professional limited liability partnerships. Texas taxes PLLCs in the same way as it taxes corporations. Conversely, an LLP does reap the benefits of pass-though taxation – passing its income and losses through to the partners. Another advantage of the LLP is that individual partners are not held liable for the malpractice or negligence of other partners.
LPs, limited partnerships, and LLCs, limited liability companies, are two of the most popular business entities today. Both are treated like general partnerships for tax law purposes, having pass-though taxable income and loses. LLCs are a hybrid that mixes the best of corporations and partnerships. Each owner, called a “member,” enjoys limited liability and they may distribute profits in any manner they want, disregarding each member’s capital contribution. LPs involve one or more general partners and one or more limited partners; the general partners have 100% liability for partnership obligations and participate in the management, whereas the limited partners have no liability and cannot participate in management. (Many who form LPs make an LLC the general partner thereof.)
If you’re ready to start a business, Holmes PLLC can help. Holmes PLLC specializes in setting up business entities, helps clients to structure trusts, limited liability companies, limited partnerships, professional limited liability companies, and limited partnerships.