Determining your business structure is one of the most important choices your company can make. Deciding to incorporate, whether under an S-corp, C-corp or LLC, shields your owners from personal liability. It can also give them flexibility when it comes to taxes, debts and lawsuits. Read on to learn more about what a limited liability company is, and how the LLC business structure can benefit you in Austin, TX.
Registering an LLC
A limited liability company requires you to register with your state, as opposed to sole proprietorships and partnerships. They provide much of the same protections that S-corps and C-corps do, but they’re cheaper and easier to form.
To start an LLC, it’s wise to work with a skilled business attorney. Together, you’ll file the required paperwork with your secretary of state’s office, including a certificate of formation and an operating agreement. You’ll also need to choose a name, appoint an agent for service of process, obtain a federal Employer Identification Number and file annual franchise tax reports. You will also be required to pay the state fees for LLC formation.
Benefits of an LLC
Here’s a closer look at some of the benefits of structuring your business as an LLC:
- Protect your assets: The biggest benefit to an LLC, as opposed to a sole proprietorship or partnership, is that it will protect your personal assets from lawsuits and debt collectors. With an LLC, you’ll never have to worry that your home could be seized to pay business debts or damages.
- Tax benefits: LLCs offer pass-through taxation—that is, the business’s profits or losses are passed through to the owner’s or members’ personal tax returns. This also makes them eligible for the 2018 Tax Cuts and Jobs Act, where 20 percent of the net business income can be deducted from a member’s personal tax return.
- Flexible business structure: Unlike traditional corporations, LLCs offer a good deal of flexibility in structure. There are no limits on how many members (owners) an LLC can have, or on how the business is managed. LLC members are free to manage and operate the business on a day-to-day basis if they so choose. They can also choose whether they want to be taxed as a sole proprietorship, partnership or traditional corporation.
- Easy to form: LLCs are one of the easiest business structures to form, while still offering significant protections against taxation and lawsuits.
- Offers credibility: Finally, LLCs offer credibility to your business. Since the company is registered with the state, your customers or clients will rest easy knowing that you take your work as seriously as they do.
The only major drawback to the LLC business structure in Austin, TX is that they aren’t particularly good if you’re seeking outside investors. For example, traditional corporations can solicit investments in exchange for stock; most venture capitalists prefer to work with corporations for that reason.
However, if your business doesn’t require investors, you’ll appreciate the flexibility and protections an LLC can offer.
When you need to set up your limited liability company in Austin, TX, call Burk Law Firm, P.C.