Choice of Entity Decision Tree

In selecting a form of business entity for operations in Texas the following five business entity forms are available: • Corporation • General Partnership • Limited Partnership • Limited Liability Partnership (“LLP”) • Limited Liability Company (“LLC”) The form of business entity most advantageous in a particular situation depends on the business objectives for which the entity is being organized. In most situations, the choice of entity focus will be on how the entity and its owners will be taxed and the extent to which the entity will shield the owners and managers of the business from liabilities arising out of its activities. An increasingly important factor in choosing the form of entity, and its state of domicile, is the extent to which the fiduciary duties and personal liability of the entity’s board of directors (“Board”) or other governing persons may be limited in the entity’s governing documents.

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