Choosing to form a Texas LLC offers an attractive option for numerous businesses. In the case of an LLC, you will notice a long list of advantages over other business structures, along with the benefit of being a formal company.
Among the various reasons to form limited liability companies in Texas, doing so is relatively simple. The state wants official businesses as this improves the economy and can provide additional income for them via taxes. As such, they try to make the process of forming a Texas LLC fairly straightforward.
It becomes even simpler to form an LLC in Texas if you choose to get professional assistance. There are various companies with experience forming LLCs in a range of industries so they can guide you through the process and even provide templates for key formation documents.
One of the biggest reasons to form Texas limited liability companies is to take advantage of the so-called corporate veil. This refers to the fact that creditors of your LLC are not legally able to go after you on a personal level for lawsuits, accidents, or other debts. In fact, that is the primary reason that choosing to form a sole prop is risky. With a sole prop, your personal assets are fair game for creditors.
With an LLC, you will find that potential partners and clients view your company as more reputable. The simple fact that you put in the effort to create a legal business entity indicates that you are committed to your business. That commitment leads to an assumption of quality products and services.
In some ways, LLCs offer the best of multiple characteristics since you get the advantages of a professional reputation but have fewer formal requirements than corporations. Corporations, for example, must have annual meetings and record minutes with a great deal of detail. Neither of these is a requirement for LLCs with Texas laws.
Forming an LLC will actually give you some important tax advantages as well. Compared to a sole prop, you can end up paying the government less in income taxes as well as payments like social security and Medicaid.
LLCs also have a great deal of flexibility when it comes to taxation status. Corporations can only choose from S- or C-Corp taxation statuses. By contrast, LLCs can pick one of those or remain a partnership or disregarded entity. This flexibility contributes to the ability to pay lower taxes with LLCs since you can select the taxation structure that makes the most sense for your situation.
Texas LLCs even offer greater flexibility in terms of membership than corporations. S-Corps cannot have a number of members over 100. C-Corps do not have this limit, but they do face double taxation plus additional regulations. By contrast, LLCs do not have those negatives of C-Corps but also do not have any member restrictions in terms of number.
If you are unsure if you should form an LLC, consult an expert in the state's different business entities.