In selecting a form of business entity for an oil patch deal in Texas the organizer or initial owners can consider the following five business entity forms:
• General Partnership
• Limited Partnership
• Limited Liability Partnership (“LLP”)
• Limited Liability Company (“LLC”)
The form of business entity most advantageous in a particular situation depends on the business objectives for which the entity is being organized. In most situations, the choice of entity focus will be on how the entity and its owners will be taxed and the extent to which the entity will shield the owners and managers of the business from liabilities arising out of its activities. An increasingly important factor in choosing the form of entity, and its state of domicile, is the extent to which the fiduciary duties and personal liability of the entity’s governing persons may be limited in the entity’s governing documents. The 83rd Texas Legislature, 2013 Regular Session (the “2013 Legislative Session”), which convened on January 11, 2013 and adjourned on May 27, 2013, did not change the forms of business entity from which to choose or the principal entity choice factors for an oil patch deal, but did enhance their flexibility and the desirability of Texas as a place to organize a business.
Originally published for the TexasBarCLE and the Business Law Section of the State Bar of Texas.
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