Dba Or Llc In Texas – Thinking of Incorporating Your Business in Texas as a Limited Liability Company? Learn the pros and cons of structuring your business as an LLC in Texas.
As with any business structure, there are pros and cons to setting up your business as a limited liability company, or LLC, in Texas. Whether a particular feature is an advantage or a disadvantage may depend on the type of business structure being compared.
Dba Or Llc In Texas
Generally, an LLC is considered beneficial because it offers the same limited liability as a corporation, but with less formality of formation and operation. However, as will be seen, it is a bit more complicated than that.
How To Start An Llc In Texas (tx Llc 2023 Guide)
Limitation of liability. LLC owners, also called members, are not personally liable for the debts of the business, including debts arising from most lawsuits against the company. This is the main reason most people create LLCs for their businesses. A corporation also carries limited liability, but an LLC requires less formality.
A limited liability partnership, or LLP, also provides asset protection to all owners, but is more limited in terms of tax options. A limited partnership, or LP, only limits the liability of the limited partners – not the general partners who are involved in the actual business. There is no limitation of liability for individual entrepreneurs or for partners in a collective partnership.
Registration costs. The cost to form a Texas LLC is $300. This is the same as a corporation, but less than the cost of registering a limited partnership ($750). It’s also less than the cost of registering a limited liability partnership (LLP), for which the registration fee is $200 per partner. There is no annual fee to register an LLC in Texas.
Flexible tax treatment. For federal tax purposes, an LLC has a choice about how it will be taxed. An LLC with only one member will be taxed as a sole proprietor unless it elects to be taxed as an S corporation or C corporation. An LLC with two or more members will be taxed as a partnership unless it elects to be taxed as an S corporation or C corporation.
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Minimal formalities. There is no requirement under Texas law for an LLC to hold annual meetings or keep detailed minutes, as is the case with a corporation.
Flexible membership. There are no limits on the number of LLC members. With an S corporation, there can be no more than 100 members. Although a C corporation can have multiple members, the business will be subject to double taxation as well as multiple regulations that apply to its operations.
Registration costs. As mentioned above, the initial filing fee for an LLC in Texas is $300. For a sole proprietorship or general partnership, there is no registration requirement, so there are no registration costs. However, these other two forms of business do not provide protection from personal liability.
Registered agent. Unlike a sole proprietorship or general partnership, an LLC must have a registered agent for the purpose of receiving official documents, such as lawsuits and subpoenas. If your LLC appoints a member or employee as its registered agent, there are certain office staff requirements that must be met. If your LLC hires an outside registered agent, it will cost anywhere from $40 to $500 per year, depending on the agent you hire.
State Of Texas: ‘we Don’t Have Enough Staff’
Texas Taxes. The two types of business taxes for a Texas LLC are sales tax and Texas franchise tax. All businesses are subject to sales tax. The only types of business entities that are not subject to the franchise tax are sole proprietorships and general partnerships in which all of the partners are individuals—that is, none of the partners is a corporation, LLC, or other type of business entity. For more information on LLC taxes in Texas, visit the Texas Comptroller’s website.
Federal self-employment tax. The self-employment tax for a Texas LLC is the same as for an LLC formed in any other state. This is no different whether the business is run as a sole proprietorship, general partnership, LP, LLP, or S. Unless the LLC elects to be taxed as a C corporation, all of the LLC’s profits are passed through to the members. Members will have to pay self-employment tax on their share of the earnings, even if they don’t actually receive a share of the earnings.
Difficulties in raising capital. Unlike a corporation, an LLC cannot issue stock to raise capital. Any new investor will need to become a member of the LLC, which is a more complicated process. Additionally, many outside investors consider LLCs risky and prefer to invest in corporations.
Difficulties with obtaining credit. Banks and other lenders may be more reluctant to lend directly to an LLC than to a corporation. LLC members may be required to personally guarantee the loan, which partially destroys the liability limitation provided by the LLC. However, the limited liability will remain unchanged for other business debts, including claims against Sh.PK. On the other hand, lenders may also require a personal guarantee from the owner of a small business incorporated as a corporation.
Free Operating Agreement Template For A Member Managed Llc
If you need more information before deciding whether an LLC offers the right structure for your business, you can visit the Texas Secretary of State’s online resources.
Edward A. Haman is a freelance writer who has written numerous self-help legal books. He practiced law in Hawa… Read more
This part of the site is for informational purposes only. The content is not legal advice. Statements and opinions are the expression of the author, and are not and have not been evaluated for accuracy, completeness or changes in the law. You have great ideas for new businesses. You are ready to incorporate to protect yourself and your personal assets and have decided it is time to take the next step and create an LLC holding company for your various ventures. The questions then become: What type of business activity can I do with my LLC? How many different businesses can operate under an LLC? Do I need to configure a DBA? Do I need to create a separate LLC for each project? Will series LLCs work for me or should I stick with traditional multiple LLCs? By now, Delaware is known to be the gold standard when it comes to forming an LLC, LP, or corporation. A Delaware LLC is by far the most popular type of entity for most entrepreneurs building a startup. As a result, people often wonder if they can manage multiple LLCs within a single LLC holding company. Structuring multiple businesses under one “umbrella” LLC, for example, say a business owner has a trucking company incorporated as an LLC, but after a while he/she may want to offer real estate services as well. These are two completely different types of business, so the question arises whether or not the owner can offer both services within the LLC. Part of the consideration, of course, is the desire to avoid the additional costs of maintaining another LLC. The answer is yes – it is possible and allowed to do business with several companies under one LLC. Many entrepreneurs who choose to do this use what is called a “Fictitious Name Statement” or “DBA” (also known as “Doing Business As”) to run a side business under a different name. However, just because it’s allowed and possible to run several different types of business under one company (doo or corporation) doesn’t mean you should, because there can be downsides. For example, if a lawsuit is filed against one of the companies, the assets of the others could be at risk. The result is that you expose yourself to a greater degree of liability risk. In other words, if one of the parts (jobs) within the LLC was held liable, then the entire LLC could be held liable. As the old saying goes, “Don’t put all your eggs in one basket.” Instead, many people choose to file a new LLC for each of their initial ventures. This isolates risk by separating the debts and liabilities of each business. Think of separate entities that help build a huge brick wall between each LLC. There are, of course, additional maintenance fees, but they can be worth it to protect your business and provide the peace of mind that separate LLCs will afford. What about a Series LLC? Some people explore low-cost series LLCs when they want to run several different businesses, which is very tempting because there is only one annual Delaware franchise tax payment and one annual registered agent fee. However, the structure of this business entity is relatively new and unproven, so numerous obstacles often arise when doing business with a number of LLCs. Many service providers, banks, lawyers, accountants and other companies are not yet familiar with the series concept. It often takes time to explain the concept of the series and get approval for the necessary documentation, for example, from the bank’s lending group. That
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