If you're just in the planning stages then you might want to hold off on incorporating in order to avoid the franchise tax. Here in California the annual franchise tax is $800 per year, however they waive it the first year. Obviously, the tax in Texas may be different. So check up on what the franchise tax may be. And in this current economic climate, putting things on a hold until next year does not seem like such a terrible idea. In the meantime you should be burning the midnight oil. Most small business owners I see go to their office or store and see no customers say to themselves 'no customers, no work, no problems...let's pick up the kids from soccer practice and go watch American Idol'. I knew one business attorney who used to tell his clients in a very shrill voice that if taking the kids to soccer practice is important to them, then small business is just not for them. I disagree a bit with that statement, but he's not far off the mark. That being said, if you want to avoid paying the franchise tax, then you will want to limit your liability by not doing business this year. That means not making any contracts until next year, not signing anyone up for your staffing company until next year or signing any sort of advertising, supplying contracts for your business until next year. Now, if you absolutely have to go ahead and staff up and get the ball rolling then you would be wise to strongly incorporate before you do so. Don't kid yourself. Just because you don't have orders to fill that doesn't mean you don't have any work to do. Now's the time to do some research, some R&D, some networking, etc. and position yourself for 2010. Message Edited by sbbarca on 06-14-2009 08:55 PM

It would depend on your personal situation. A CPA who can sit down with you face to face would be in the nest position to help you decide. It might cost a little bit now but will be worth it in the long run. In Texas - watch the Franchise tax. If you take all the company funs out of the business as the end of the year - you are only required to pay taxes on assets (no personal income in Texas) - a LLC may not allow this - a C-copr will. Or, a few years ago, there was a loophole in the law about forming a LTD company that got around the tax - not sure if they have closed this loophole. There is a lot to consider - and a lot of it depends on you - spend the money - get a CPA - then put it behind you and focus on growing your business.

That would be the cheapest way to go.  Another option is to setup a partnership with a family member, make them a 1% stake holder.  Its easy to do and gives you some added benefits over a sole proprietorship.  Be sure to look into an S corp and compare it to an LLC to make sure you get the right one for your business.

As a business owner of a sole proprietorship, you would be personally liable for business debts/obligations. With an LLC, you would be provided with greater personal liability. Details about the various business entities can be found here, on our Business Incorporation page. You can also check out a recent article on this topic, Which Legal Structure is Right For You?

I agree, if you can afford it - set up the business as an LLC to avoid an risks to personal losses. Ultimately, your option will work - but it is easy to just forget about it and eventually get in a bad situation.   Charles Monkey Joes To Go  

That would be the best thing to do.