What is an LLC?
The limited liability company (LLC) is a relatively new form of company created and available in many states as an easy to create and maintain pass through taxation entity. What is an LLC? An LLC in Texas is protection from liabilities and creditors of the LLC as long as the LLC is formed correctly with proper initial documentation and the business is operated properly.
Existence is perpetual: An LLC will survive the death of its owner(s). It carries on in doing business much like a corporation.
Tax Savings for an LLC are thus: a regular corporation, a C Corporation, is subject to double taxation. Essentially profits are taxed from the corporation as are the distributions or dividends to the shareholders. An LLC is completely pass through. You receive the income and are taxed on it accordingly on your personal taxes. The LLC is not taxed. Just as with any business entity, you can deduct or write off your legitimate business expenses from an LLC’s income.
Advantages of an LLC over other entity choices:
- Taxation: An LLC can elect to be taxed as a sole proprietorship, partnership, or corporation, either a c-corporation or an s-corporation. When left at its default a Texas LLC is taxed as “pass-through entity” and all of the profits and losses of the LLC “pass through” the LLC to the members, who report the profits and losses on their personal tax returns. The LLC does not pay federal taxes on itself.
- Minimal Formalities: Corporate formalities have been relaxed over the years, but the LLC was designed to be less formal, with less upkeep and requirements. There is no required annual meeting or minutes thereof.
- Protection from Other Member’s Creditors: Yet another advantage of forming an LLC in Texas as opposed to a corporation is protection against outside liabilities, or more simply, the liabilities of the members and/or managers of the LLC. The typical corporation does not have this protection from the owner’s creditors.
Thinking about an LLC? Want to know what is an LLC? Contact us HERE for more information and to speak with an attorney about your options when developing your business. The above does not constitute legal advice nor create an attorney client privilege. It is merely meant for entertainment purposes and general information.