You are faced with many questions when starting your business. One of those questions is what type of entity should my business be. Many businesses choose to operate as a limited liability company. Operating your business as a limited company offers several benefits over operating it as a sole proprietorship or a C-corporation.
A limited liability company is a fairly new entity created in Texas law. It has characteristics of both a corporation and a partnership. A limited liability company has members that are comparable to shareholders in a corporation. These members receive liability protection like shareholders of a corporation do. This means that members of a limited liability company cannot be held personally responsible for actions taken by the limited liability company.
One of the main differences in a corporation and a limited liability company is the way the company is taxed. A corporation is subject to what double taxation. First the corporation is taxed, and then the shareholders are taxed on the income received from the corporation. A limited liability company has more options when it comes to taxes. First, it can be taxed as a sole proprietorship or a partnership. That means that the company’s income passes through the company to the members, and the members are responsible for paying taxes as if they were self-employed or were a partnership. The company itself does not pay taxes like a corporation does. It can also choose to be taxed as a C-corporation or an S-corporation. In order to determine which form of taxation is right for your company, you should speak with an accountant who understands small businesses.
A limited liability company has the advantage of being more flexible than a C-corporation. A limited liability company does not have to hold annual meetings like a corporation does. It can also be formed with just one individual. There are far fewer administrative requirements with a limited liability company, which means you can concentrate on running your company and not have to deal with the complications of a corporation.
If you are forming a new business, an experienced Arlington TX business law attorneys can advise you on the best strategy when forming your new business.
Thanks to our friends and contributors from Brandy Austin Law Firm PLLC for their insight into forming an LLC.