Corporate Business Structure
Once you’ve got an idea for a business, the first step will be to form a legal entity. There are ton of articles on this topic. If you search “what kind of business should I start” you’ll come across plenty of information about forming an LLC, LP, S-Corp, C-Corp, etc. I found it useful to look at other companies in our industry and see what they have used.
In addition to the types listed above, there is also a corporate structure called a “statutory close corporation.” I had already started the company as a C-corp when I came across it. It offers similar advantages to that of a C-Corp when it comes to capital structure, but it can significantly cut down on the paperwork. You can operate like an LLC, which is the easiest to start, run and still have liability protection. I wouldn’t even consider running a business as a sole proprietor. With Legal Zoom and Bizfilings doing the filing for less than $500, the risk is just not worth it.
You can read more about statutory close corporations on Toolkit.
Check back for my notes about using 401k’s and IRA’s to fund your startup. There are some special rules for statutory close corp, so if you are interested in forming this type of business, be sure and check back for more tips.
Tip: Bizfilings didn’t have statutory close corporation as an option on the website. I inquired with them and they didn’t know the requirements in Texas, but they contacted the State office and found out. Conversion from C-Corp to statutory close corporation was going to cost less than $200.