"If opportunity doesn't knock, build a door" Starting a new business is a big undertaking. There is so much to set up, prepare, file and do, especially if you want to set your company up for the utmost success in the long run. Even if you’re an MBA or a long-time executive, starting your own business from the ground up can be difficult – especially given all the legalities that go into it. At de la Riva & Associates Attorneys in San Antonio, we’d like to help you get the best possible outcome for your case. www.delarivalaw.com

2. Isabel de la Riva
Founder and Senior Partner
de la Riva & Associates Legal Team

3. Thinking of Starting A
Business?
Planning on Buying A Business?
Wanting to Formalize An
Existing Business?

4. Name of Entity
 Name Protection
Organization
 Partnership, LLC, Corporation
Costs and Fees
 Filing fees, attorney fees,
startup costs
Business Plan
 Research, write and produce

5. Beginning Capital: Who and how much. Money
or sweat.
Property Contributions: Tax issues, changing
title, costs, choosing a location.
Interest or Return: Paycheck or distribution.

6. Independent or Partnership
Member or Manager Managed
Traditional Roles or No Hierarchy
Powers of each
Scope of responsibility
Accountability: To Whom and when
Limitations: Extraordinary transactions
Indemnification
Removal or Resignation

7. Bank Accounts: Set up, EIN
Accounting Periods: Fiscal or Calendar
Reports: To State, to members, to IRS
Bookkeeping
Meetings
Changes to Agreement
Disputes

8. Exit Strategies
Winding Down Procedures
Liquidation and Dissolution
Limitation of Liability
Transfer of Interests:
to family, third parties
Dissolution:
Planned or Unplanned

9. The advantages and disadvantages of each legal
business formation depend upon the objectives
of the business owners and the assets that the
owners contributed to the business, past and
present.
With each choice of a legal formation, there are
various qualifying requirements, degrees of
liability, tax consequences, and possibilities for
exiting and ending of the business

10. No, you cannot do it all.
Banker
Accountant
Lawyer
Manager
Marketing Person
Salesperson
You DO need to be familiar with these areas,
but it is UNNECESSARY AND UNWISE to do it
alone

11. Acquire professional assistance
Legal services
Accounting services
Marketing services
Saves you time and money

12. Discuss your decision with the people around
you: family, partners, friends.
Create a legal entity through the Secretary of
State
Have an attorney assist you
Have a CPA assist you
CONTROLLED RISK

13. Sole Proprietorship
Partnership
Limited Liability Company or
Professional Limited Liability Company
Corporation

14. Simplest and Least Expensive
Owner receives all profits
Owner has all responsibilities and liabilities
You get what you pay for

15. Business enterprise owned jointly by 2 or more
Profits, debts, and liabilities are shared
Can create a LIMITED PARTNERSHIP or a
GENERAL PARTNERSHIP
GENERAL PARTNERSHIP
All partners participate in the
day-to-day management of the
business
LIMITED PARTNERSHIP
Has passive partners who
contribute capital but have
minimal control

16. Legal entity who can own a business, sue or be
sued
Must pay its own taxes
Operates the business according to a written
charter issued by the State
Different forms available

17. The sole proprietorship contains the
most risk because there is no limited
liability protection inherent in this
legal business form.
The business owner is personally liable
for any claims against his company
that are not covered by some form of
business insurance.
The business owner's personal assets
are not protected.

18. Enjoys complete control over
business
This type of business owner
receives all the profits, but also
has sole responsibility of all
debts and liabilities
Income tax returns combine
business and personal income

19. Advantages
Least amount of red tape to complete in
establishing the business
Little or no expense in forming or
dissolving the business
Simplicity of operation
Certain reporting requirements are not
necessary
Income is taxed only once

20. Disadvantages
Unlimited liability for business debts.
Income tax rate may be higher than
the corporate form of business
organization.
Tax saving or retirement plans are
complicated.
If the business is to operate as a sole
proprietorship or partnership, the
entrepreneur should consider recording
a declaration of business name.

21. Partnership form is necessary when
there are several owners involved in
a business
Income tax returns are information
returns that allocate income or
losses to the partners
The partnership or business must
file its own return, but it pays no tax
Partners must claim their share of
the profits or losses on their personal
returns

22. Most common partnership
All partners sharing equally
Equal ownership
Equal management decisions
Equal responsibility for partnership debts

23. The limited partnership must include at least
one or more general partners who participate in
management decisions and who have personal
responsibility for the partnership debts
There will also be one or more limited partners
who do not participate in management and
whose liability for partnership debts is limited
to the amount they have contributed to the
business

24. Advantages
Allows persons with insufficient net
worth to pool funds to purchase a
business
Provides an opportunity to split
management duties, unless the partner
is a limited partner
Income is taxed only once

25. Disadvantages
Must share the decision making with
other partners
Compatibility and cooperation of the
partners are essential
Each general partner has unlimited
liability for the debts of the partnership
If all but one of the general partners are
financially unsound and unable to pay debts,
the one financially secure partner can be
required to pay the total amount owed
Income tax rate may be higher than a
corporation

26. Most permanent form of business -
continues for the life of its charter
regardless of what happens to the
original organizer
Owned by stockholders in proportion to
their number of shares
Can be a one person operation with
only one stockholder holding all stock
and being the only officer
“S” and “C” Corporations dictate how
taxes are handled

27. The S Corporation
Taxed the same as a partnership
Income of S Corp passes directly to
stockholders who pay taxes on
their shares without any federal
income tax being paid for
corporation itself
The C Corporation
Pays corporate income tax on its earnings
Stockholders pay income tax on dividends

28. Advantages
A corporation pays 15% of federal income tax on
taxable income up to $50,000
25% tax on income from $50,001 to $75,000
With incremental increases at 100k and 335k
It is easy to sell part of the business.
Bank financing may be obtained more easily

29. Disadvantages
Earnings or income withdrawn from a
corporation must be in the form of
dividends or bonuses  both are taxable to
both the corporation and the shareholder
More difficult to transfer cash in and out
Requires the most paperwork: annual
meetings, minute book and record of stock
and stockholders
Annual report, annual minutes and fee due
to Secretary of State
Requires By-Laws, Articles of Incorporation
and issuance of stock with SOS approval

30. The C Corporation
Is the default corporation
All corporations are automatically C unless they are
specifically set up to be S
The S Corporation
Known as the “Small Business Corporation”
Governed by Subchapter S of the IRS Code of 1986
To qualify, a business MUST comply with strict
eligibility requirements with regards to the number
and type of shareholders

31. The LLC is the most flexible of the business legal
forms AND it provides a considerable amount of
liability protection
The number and type of owners is NOT
restricted
Liability protection for owners so long as there
is no fraudulent activity
Rules for administering an LLC are not as strict
as those for an S or a C corporation

32. An individual in business by
himself, with no employees, can
make his/her company an LLC
It is treated as a disregarded
entity for tax purposes
As a single-member LLC, a
business person can treat the
business like a sole
proprietorship and only needs to
file a Schedule C with the IRS

33. LLC is a powerful tool, and in many
cases, it’s the SOLUTION.
Attractiveness and power of an LLC:
single level of income tax and limited
liability
LLC members face only one level of
income tax: any items of income, gain,
loss, deduction, and credit flow
through to the member
Unlike S corporations, the favorable
tax treatment is not dependent on the
identity of the members and there is
no limited to the number of members

34. Advantages
Same liability protection as a Corporation
Can be taxed as a partnership, with single
level, flow-through taxation vs. double
taxation
Flexibility of business deals
Losses – which are common for start-ups,
can pass through the entity and be
deducted directly by the owners of the
business
All members/owners of LLC are protected
from liability
Easy to form and dissolve

35. A disadvantage to forming an LLC:
Upon sale, the LLC would likely have some ordinary
income component that would be taxed at a higher
rate than if a business were to end up selling its
stock as a C or S corporation, where it would
receive capital gains treatment,

36. But losses from single-member LLCs flow
through automatically when filed on the
Schedule C
From a tax perspective, there is no difference
between a sole proprietorship and a single-
member LLC
You get the benefit of limited liability
protection without having the additional
administrative burden of filing an additional tax
return

37. It can’t hurt you from a tax perspective to form
a limited liability company.

38. A limited liability company offers the same asset
protection as a corporation
If you sign agreements in the name of the LLC,
then the LLC is the responsible party on the
agreement, not you as an individual owner
If the business is not successful, or if it incurs a
large unexpected debt (not personally
guaranteed), then your personal assets are
protected from LLC creditors

39. To have asset protection benefits,
especially the sole member LLC,
owner must observe formalities
and operate business as an LLC
Need adequate capitalization
depending on the nature and
extent of the business
Have annual meetings and
produce statements about the
past business year and
expectations for the future

40. Owner must enter into contracts through LLC
and not personally
Use checks and stationary to give notice to third
parties they are dealing with an LLC

41. Needs a separate checking account and set of
books
Formal bookkeeping
No need for separate federal income tax filing
Income tax reported on Schedule C of your
personal tax return
For federal income tax purposes, the single
member/owner LLC is disregarded

42. Limited Liability Company
Natural asset protection
features
Shields investors and active
participants of the business in
the same way as corporation
Advantage over corporation
when it comes to creditors’
claims against the owner of the
business
Corporation
Separate legal entity that pays
taxes
Own by shares

43. Limited Liability Company
Asset protection advantage
Limited Liability Partnership
Fully responsible for all claims
against the partnership
LLP will likely have a
corporation for a general
partner to limited the liability of
the GP, but then you increase
complexity when setting up a
business arrangement by
creating a corporate entity
within a partnership entity

44. Agreement by which owners govern themselves
can have additional asset protection features
written into the business arrangement
Issues will vary depending on whether owners are
family, strangers, wealthy, cash-tight, or a mixture

45. Management
of business
LiabilityOwnership
Operating
Agreement can
delineate duties,
roles,
responsibilities,
etc.
Answers the HOW, WHEN, WHO, WHAT
questions of your business

46. Many people create LLCs for protection of their
personal assets from creditors and lawsuit
related to their business
If proper procedure is followed, an LLC will
extend protection to the owners of the LLC from
the creditors of the LLC

47. Comprehensive LLC Operating Agreement
followed by the owners
Accounting procedures to keep the owner’s
personal asset separate from the business
assets
Clear, timely, and accurate documentation of
funds going in and out of the LLC
Operating procedures consistent with the LLC
being a separate valid business entity
Singing contracts in the name of the LLC
Using personal guarantees only as a last resort

48. Employees
Contracts
Trademark
Marketing
Team of Professionals

49. What does it take?

50. Be your own boss

52. Offices in
San Antonio, Houston, and McAllen
SAN ANTONIO OFFICE
13407 NW MILITARY HWY
SAN ANTONIO, TEXAS 78231
(210) 224-2200
HOUSTON OFFICE
2180 NORTH LOOP WEST, STE 550
HOUSTON, TEXAS 77018
(281) 769-1150
MCALLEN OFFICE
520 WEST PECAN BLVD, STE G
MCALLEN, TEXAS 78501
(956) 616-4151
www.delarivalaw.com
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