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Entity Formation

Entity Formation: Start Your New Business With Confidence

Entity Formation: Start Your New Business With Confidence

The excitement of a new business venture can be intoxicating. But nothing will bring you down faster than the sea of red tape you must wade through to really get your business started. As a way to help, we’ve detailed the most common entity documents entrepreneurs need and what each one must contain. Hopefully, this will give you a head start on your next business venture.

The paperwork you’ll need to file in order to properly start your business will vary based on a number of factors. First, you have to take into consideration your location. Certain states and localities have specific requirements for establishing a business, so it is always best to check for local regulations. The second set of variables concerns the type of entity you’ve chosen to begin. The needs of a sole proprietorship or a partnership differ from those of an LLC or corporation and so on.

What you need to know to get your business started.

Certificate of Assumed Name

If you are opening a sole proprietorship or an unincorporated partnership, the amount of paperwork you must complete is relatively light. One thing you will need to do, however, is fill out a Certificate of Assumed Name. In most states, these forms can be found in the county clerk’s office, and registering them involves a nominal fee. This form aligns the assumed name (the name you have chosen for the business) with the name of the business owner, certifying that there exists no separation between the personal and the professional for tax and liability purposes. The form works the same way for unincorporated partners, but such partners should have a signed partnership agreement established prior to filing a Certificate of Assumed Name.

Certificate of Partnership

If two or more business owners wish to form a Limited Partnership, they will need to complete a Certificate of Partnership. Limited Partners have limited management input, but, in turn, they take on limited liability for legal claims. The details of a Limited Partnership are spelled out in the Articles of Partnership. Here, each party enters into an agreement concerning the purpose of the partnership’s business, the level of contribution demanded of each partner, how the partnership’s profits will be divided, how the partnership will be managed, and under what circumstances partnership rights can be transferred and sold. Certificates of Partnership are typically filed with the Secretary of State in the state in which the partnership will do business.

Limited Liability Company (LLC): Certificate of Organization

A Limited Liability Company (or LLC) is a company that can be owned by one or more people, known as members. As the name implies, the LLC limits the amount to which individuals are personally liable, protecting business owners from litigation. LLCs also offer some flexibility on taxation, making them a very popular choice.

In order to form an LLC, business owners must file a Certificate of Organization with the Secretary of State. In some states, this document is also known as the Certificate of Formation. Each state’s filing requirements may vary to some degree, but the overall process is similar. After filing the required paperwork, the state sends back the legal certificate, which states when the LLC was duly formed and recognizes it as a legal entity within the state.

Entity Formation Is the Foundation for Business: Helpful Q&A


What type of entity should I form?

The Office of the Secretary of State has provided general information about types of Texas business organizations on our Selecting a Business Structure page. For personalized assistance, you should consult with Silver Accounting Group’s Entity Formation Services.

 How do I form a Minority Owned Business?

For information on certifying a “historically underutilized business,” please contact the Texas Comptroller of Public Accounts at (888) 863-5881 or (512) 463-5872.

 What is the difference between a member and a manager of an LLC?

A member of an LLC is a person that holds an ownership or membership interest in the LLC. An LLC is always going to have at least one member, but the affairs of the LLC can be managed or governed in one of two ways.

 What is a registered agent?

A registered agent is an individual Texas resident or a domestic entity, or a foreign entity that has qualified or registered to transact business in Texas who is responsible for receiving and forwarding service of process or official notices addressed to an entity.

 Can one person be the sole shareholder, director, and officer of a corporation?

Yes. The Texas Business Organizations Code requires that for-profit corporations and professional corporations have at least one director, one president, and one secretary.

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