If you’re setting up a small business or restructuring an existing entity, you might be considering forming an LLC. A Texas limited liability company (LLC) experiences a number of benefits. The main reason owners file is for the liability protection it affords, but an LLC also receives tax and other benefits.
What Is an LLC?
A limited liability company is its own legal entity. Like a corporation or partnership, it receives a tax identification number. Instead of the owner having to do business, complete financial transactions and file paperwork in his or her own name, they can accomplish all those tasks under the LLC.
Corporations and partnerships are completely separate from their owners. A traditional corporation must pay taxes on the business’s income, while an LLC passes profit and loss through to the owner’s personal tax return.
A Texas LLC is such a popular choice for small business owners because it offers these advantages:
Business Name Security – Once a business owner chooses and registers their business name, no other company in Texas can use that name. An LLC keeps other parties from using the owner’s hard work and reputation to start their own business and protects the brand’s image from misuse.
Tax benefits – LLC members can choose to pay taxes as a corporation (c-corporation or s-corporation), partnership, or sole proprietorship. Most choose a partnership or sole proprietorship, remaining a pass-through entity with members furnishing information on profit or loss on their personal return. They can deduct business expenses and overhead from revenue along with asset depreciation. A corporation pays taxes at both the corporate and shareholder level, but an LLC is only taxed once.
Limited owner liability – If one of the company’s clients brings a lawsuit and the LLC faces penalties, the owner retains their personal assets. Small business owners might have to part with some of their business assets, but their personal property and accounts remain secure.
To form an LLC in Texas, members need the following:
- A unique name not used by any other Texas company
- A street address
- A registered agent who receives correspondence and files reports
- Each member’s name and address
- A completed Certificate of Formation
- The one-time state filing fee of $300
When you’re starting a new business, make sure you’re building on a solid foundation with reliable legal advice. The business formation lawyers at Bennet, Weston, LaJone & Turner can help you decide what type of entity best fits your needs and help you through the startup process.