Partnerships – Lake Jackson, Texas

Partnerships – Lake Jackson, Texas

A Lake Jackson business formation attorney can help you decide which type of Texas partnership is best for your business.

Determining which type of business structure is best for your situation is one of the most important decisions you will make. If you have already settled on a partnership, Texas recognizes several different types. You will want to consider two factors before deciding on one — taxation and personal liability.

Taxes and Personal Liability with Partnerships

In most cases, a partnership in Texas is treated as a pass-through entity and income and losses are taxed on the partners’ personal income tax returns. While Texas does not have state income tax, some partnerships are required to file yearly registrations and may have to pay a franchise tax.

When it comes to liability, you want to understand how each type of partnership potentially exposes you personally. When you are personally liable, this means your personal assets could be used to satisfy the business’ outstanding debts. There are some types of business partnerships that offer limited liability to its partners. A Lake Jackson business law attorney can explain the differences between each type of partnership option in Texas.

General Partnerships in Texas (GP)

A general partnership is where all partners are personally liable for the debts of the partnership. Each partner has to account for his or her portion of the income, which is typically based on their ownership share. This is done in the same way that they would account for any other type of personal income earned in Texas. General partnerships are not required to pay the state franchise tax.

Texas Limited Partnerships (LP)

With a limited partnership, you have both general and limited partners. As the name suggests, limited partners are limited in their scope. They are not liable for the partnership’s business debts above and beyond their own investment, while general partners will still be liable for all Limited Partnership’s debts. All partners, general and limited, will need to account for earnings, per their ownership share. This is done on personal income tax returns, like general partnerships. One key difference is that LPs may be subject to paying the Texas franchise tax.

Limited Liability Partnerships (LLP) in Texas

Limited Liability Partnerships offer partners some protection against using personal assets to satisfy business obligations and debts, provided they had no hand in creating these debts. This means they would remain liable for any business debts they participated in creating. Because of the LLP status, they may be subject to more regulations tax wise, although they are taxed in the same manner as a general partnership. They will also be required to pay the state franchise tax.

Limited Liability Limited Partnership (LLLP)

Limited Liability Limited Partnerships are similar to LLLPs, but they will allow for limited partners who will not have liability for business debts that exceed the amount of their investment. One major difference here is that general partners are protected from debts they did not have any involvement in creating. LLLPs are taxed like general partnerships, and they are required to pay the Texas franchise tax.

Contact a Lake Jackson Partnership Attorney

If you need assistance with setting a partnership, or other type of business in Texas, it is important to speak with a knowledgeable Lake Jackson business law attorney. Contact Cordoba Law Firm, PLLC today to schedule an initial consultation.