An LLC is a type of business structure that’s a combination of a corporation and a partnership; it gives you the pass-through tax advantage of a partnership whilst giving you the limited liability of a corporation. LLCs are the fastest growing business type in America, proving they are hugely popular for a number of different reasons. The sheer numbers tell you why you should set up an LLC today.
You get limited liability
The owners of an LLC are called its members. They are not personally liable for any debts the business will incur, and none of your personal assets are taken if your business is sued or a lawsuit arises. When most people get asked why they chose an LLC, the most common reason is this: the limited liability. When everything is protected you can afford to take more risks. While a corporation offers the same limited liability LLCs are much less formal and easy to maintain.
With an LLC as well, unlike a corporation, if a member gets sued then only that member is affected. Only their shares are taken away and profits given to whoever sued them. If you write what happens to a member who gets sued in your operating agreement then you don’t have to worry further. With LLCs you can create your own, more flexible rules.
You get added credibility and professionalism
Many a time, you get businesses that start off as sole proprietorships or partnerships that then choose to either incorporate or become an LLC. This is because LLCs are considered higher than these two business types, and much more professional. It can add extra respect to your business by having the phrase ‘LLC’ in it. You might start rolling in more professional customers than you would with a sole proprietorship, so why wouldn’t you go for an LLC? It’s all the professionalism of a corporation without the hassle of all the formalities and documentation.
Registration cost is cheaper
Forming an LLC in Texas costs $300. This is the same as the cost for a corporation, but less than half of the cost of registering a limited partnership, which is $750. It’s also less than the cost of forming an LLP, which is $200 per partner – and there will obviously be more than one.
While forming an LLC in this state can seem costlier than in other states, there is no annual Texas LLC registration fee, unlike so many other states. There’s just the upfront cost, and then you’re all good to go for the rest of your company’s lifetime.
There’s lots of tax treatment flexibility
For federal tax purposes, an LLC actually has a choice on how it would like to be taxed. LLCs with only one member are taxed like sole proprietorships, and LLCs with two or more members are taxed as partnerships. There is another option, though – LLCs can vote amongst themselves and choose to be taxed also as either an S corporation or a C corporation.
Being taxed as a sole proprietorship or a partnership is what most people tend to go for, though, and it’s not surprising – with these business types you get pass-through taxation, which means profits and losses are passed through from the company to its members. The members are the ones who report profits and losses on their personal tax returns. With corporations you’re subject to double taxation, meaning you’re taxed on the corporate level and again at the shareholder level.
There’s a lot of flexibility
LLCs are more ‘laid-back’ than corporations. There are no requirements to do things like hold annual meetings, or to keep detailed minutes, and there is a great deal of management flexibility – all things which you just cannot do with a corporation.
If you’re ready to set up a Texas LLC now, visit this site. TRUiC has a detailed step by step plan on how you can do so, with lots of useful tips.