Off all of the benefits, taxation and liability are the two most important factors. Within this site you will find lots of information regarding the pros and cons of forming an LLC in Texas. Our goal here is to provide you with accurate information that doesn't try to push into one direction over another. Some individuals and or their businesses needs will be better served with an LLC, some will not. It's your job to do your homework to find out exactly where you should be.
Is An LLC Right For Me?
Starting a successful business is tough work and its important that you have honest advice from a reputable source right from the start.
Business owners who are still operating as a sole proprietorship should seriously consider converting to a LLC structure as soon as possible. Why would a business owner want to do that? Here are some of the reasons why a LLC structure can be the best for your business.
Limited Liability Keeps You Protected
The best part about forming a LLC is that the personal assets of the business owner or owners are protected from a possible lawsuit. For example, say a client slipped and fell at your office which resulted in $100,000 of medical bills. Even if you have liability insurance for your home or business, it may not cover the entirety of the balance. However, if you own a LLC, only company assets are available for seizure by the person who sues you.
You Can Be Treated As A Disregarded Entity
If you don't want to take on the additional paperwork that is required from corporations, you can always be a disregarded entity for tax purposes. In other words, there is no distinction between yourself and your business. Only one tax return has to be filed. In many ways, it is exactly like being a sole proprietorship except that you get the same limited liability protection as any other LLC.
Partnerships Can Split Profits However They Would Like
When a LLC decides to treat itself as a corporation, it may have to split profits and losses based on share or debt basis. However, when the LLC treats itself as a partnership, the partners can spell out how the profits are going to be split between the two parties. For example, if partner A puts in 10 percent of the capital, he can still take 50 percent of the profits if partner B agrees to those terms.
An Operating Agreement May Not Be Needed
If the LLC decides to remain a disregarded entity, a formal operating agreement is not needed. This can save a lot of time and paperwork for the business owner. All corporations must have an operating agreement that spells out exactly how the company is run while detailing the rights of the shareholders and other interested parties.
The Company Can Continue Operating After The Owner Dies
A company will generally cease to be in existence once the owner of a sole proprietorship dies or decides to no longer run the company. However, a LLC can continue to be in existence after the original owner decides to no longer operate the business. In other words, the company can be transferred or sold to new ownership at any time.
Flexible Tax Options Benefit The Owners
The LLC can choose from many different tax structures. The company can choose to be taxed as a s-corporation, a c-corporation, a partnership or a sole proprietorship. This allows the company to save money in a variety of different ways.
There are many different advantages of running a LLC as opposed to other business structures. When starting your company, make sure that you do your research and pick a structure that will maximize earnings while providing tax advantages at the same time.