Who can help you start a business in Texas?

Forming a business can be a confusing process. Fortunately, help is available. Following are three approaches commonly used by Texas entrepreneurs and some pros & cons of each.

1) Do-it-yourself: the Texas Secretary of State (SOS) website has a great deal of information and forms available to you.  And, if you’re a sole owner on a tight budget, do-it-yourself may be the way to go. But keep in mind that there are hidden pitfalls:

  • Choosing the wrong entity type can result in additional corporate overhead (paperwork & reporting);
  • Registering a name without performing at least rudimentary checks to ensure that the name is (a) available and (b) permissible can cost you a bundle, not only on legal fees to respond to any cease & desist acations and to re-register or transform the entity but also in the marketing dollars necessary to to rebrand your company (not to mention causing confusion for your customers / clients);
  • The forms on the SOS site are deceptively simple, and if you don’t fully understand the impact of the options you select, you may regret it later on; and
  • If you’re not the only owner, failing to adequately document the terms of how the co-owners will operate and what happens in common contingencies and contingencies (such as an owner’s divorce), can result in additional legal fees and unnecessary liability.

Proper formation doesn’t end with filing paperwork with the Secretary of State.

2) CPAs:  Many Certified Public Accountants (and some other professional business consultants) offer business formation services.  While many of these professionals are well versed in the formation process and can certainly act as the organizer for your business and as scribe for any documents, they cannot (& should not) offer legal advice as to liability protection, company agreements, liability, licensing, or other legal matters.  They do however, know the ins & outs of how your business will be taxed and can provide valuable advice on the tax implications and pros & cons of the different entity types you are considering.  Having a good accountant is instrumental to ensuring that your business’s financials stay organized and correctly maintained–an area that many new business struggle with.  Your CPA can can also provide tax & finance-related guidance on any capital expenditures, investment infusions and/or loans.

Formation fees charged by CPAs and Business Attorneys are usually comparable. 

3) Business Attorneys: Business attorneys provide formation services as a core offering, they can guide you through not only the registration & tax filings but also will be able to advise you on any regulatory and/or licensing, restrictions as to the type of entity you form, name selection, answer any other legal questions that you have related to starting your business, and help you determine any other legal protections you need to put in place such as trademark / servicemark registration, copyrights, website disclaimers, privacy notices and the like.  Additionally, they can create or review your business documents (i.e. contracts, order forms, “fine print”, advertising, etc.) to help keep you on the right side of the consumer protection laws. And, although you may think that using an attorney can be expensive, the benefit of establishing a relationship with legal counsel at the start of the business will far outweigh any “perceived” extra cost in the long run.  Because business attorneys understand that for a new business cash flow is king, you may be able to negotiate a lower price, payment plan, or (if permissible by state law & attorney ethics rules) a small equity stake in return for legal services.  Do yourself a favor and at least talk to an attorney–many have free consultations–before you dismiss using an attorney as “too expensive.”

Bringing in legal counsel from the get-go reduces costs later on and gives you a valued adviser as your business grows.

Ideally, you’ll want to have a team of professionals that you can rely on: an attorney, an accountant, and if you can’t afford an in-house marketer, a marketing consultant (because if you can’t obtain customers for your business, you won’t be in business very long!).  As a new business owner, you’ll be tempted to wear all the hats for each task in your new venture, this may work for a while, but if your business is successful (and of course it will be!) this approach is unsustainable (you’ll either miss something BIG and costly, your business will suffer, or you’ll burn out).  My most successful clients recognize this, and I have work with some excellent accountants, whose advice both I and my clients trust and value.  Regardless of when you begin to assemble your team, make sure to pick the right team members.  For tips on how to select the right attorney for you, go here.

For additional information on starting a business in Texas, go here.   

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