Business Structure Guide
Choosing the right legal structure is one of the most important decisions you'll make for your El Paso business. This guide will help you understand your options and make an informed choice.
Why Your Business Structure Matters
Liability Protection
Determines whether your personal assets are protected from business debts and lawsuits.
Tax Implications
Affects how your business income is taxed and what deductions you can claim.
Funding Options
Influences your ability to raise capital from investors or financial institutions.
Compare Business Structures
Sole Proprietorship
Best for: Low-risk businesses, freelancers, and solo consultants
Advantages
- Easiest and least expensive to establish
- Complete control over business decisions
- Simple tax filing (Schedule C)
- Minimal paperwork and regulations
Disadvantages
- Unlimited personal liability
- Difficult to raise capital
- Business ends if owner dies
- All business debts are personal debts
Limited Liability Company (LLC)
Best for: Most small to medium businesses seeking liability protection
Advantages
- Personal liability protection
- Flexible tax options (pass-through or corporate)
- Less paperwork than corporations
- Credibility with customers and vendors
Disadvantages
- More expensive than sole proprietorship
- Annual franchise tax in Texas
- Requires operating agreement
- Self-employment taxes on all profits
Corporation (C-Corp)
Best for: Businesses planning to raise significant capital or go public
Advantages
- Strongest personal liability protection
- Easier to raise capital through stock
- Unlimited life span
- Tax deductible business expenses
Disadvantages
- Double taxation (corporate and personal)
- Extensive record-keeping requirements
- More expensive to establish and maintain
- Complex regulatory compliance
S Corporation
Best for: Profitable businesses wanting to minimize self-employment taxes
Advantages
- Pass-through taxation (no double tax)
- Personal liability protection
- Potential tax savings on self-employment
- Enhanced credibility
Disadvantages
- Strict ownership restrictions (max 100 shareholders)
- Must be U.S. citizens or residents
- Required corporate formalities
- IRS scrutiny on salary vs. distributions
Partnership
Best for: Two or more people starting a business together
Advantages
- Easy to establish
- Shared financial commitment
- Pass-through taxation
- Combined expertise and resources
Disadvantages
- Joint liability for business debts
- Potential for partner conflicts
- Shared profits
- Each partner can bind the business
Texas Filing Requirements
Choose Your Business Name
Ensure your name is available and complies with Texas naming requirements. Check availability through the Texas Secretary of State website.
File Formation Documents
Submit Certificate of Formation (LLC) or Articles of Incorporation (Corporation) to the Texas Secretary of State. Filing fee: $300 for LLC, $300 for Corporation.
Obtain EIN
Apply for an Employer Identification Number (EIN) from the IRS. This is free and can be done online immediately.
Register with Texas Comptroller
Register for state taxes if applicable. Most businesses need to register for sales tax, franchise tax, or employment taxes.
Create Operating Agreement
Draft an operating agreement (LLC) or bylaws (Corporation) to establish internal rules and ownership structure.
Register in El Paso
Obtain local business permits and licenses from the City of El Paso. Requirements vary by business type and location.
El Paso Specific Considerations
Border Business Opportunities
El Paso's location on the U.S.-Mexico border creates unique opportunities for international trade. Consider structures that facilitate cross-border operations.
Local Incentives
The City of El Paso offers various incentives for new businesses. Your business structure may affect eligibility for certain programs.
Professional Advice
Consult with a local El Paso attorney or CPA before making your final decision. They can provide guidance specific to your situation and industry.