Limited Liability Company (LLC)

Advantages of an LLC

Limited liability companies offer many advantages to a business and its owners.

• Limited Liability: The biggest protection a LLC provides for business owners is limited liability protection. This means that, in most cases, a business owner is shielded from liability for the debts and liabilities of a company. This protection can be lost in certain circumstances. An experienced small business lawyer can help you understand how an LLC can shield you from your business’s debts.
• Flexible Management: Limited liability companies allow their members to decide what type of management structure they want. Members can choose to have the company’s management structure resemble that of a corporation, a partnership, or something different entirely. Members accomplish this by drafting a company or operating agreement.
• Taxation: Limited liability companies do not have double taxation of income, that is taxation at the corporate and member levels, like corporations do. LLCs are initially considered “disregarded entities” if they are owned by a single member, or as partnerships if there are multiple members, for tax purposes. However, LLC members may elect to have their business taxed in a variety of ways including as a C-Corp (a traditional corporation) or an S-Corp.
• Ease of Operation: LLCs are not governed by the same rigid rules as corporations. This can make them easier to operate, especially for small businesses.

LLC Considerations

While LLCs have many advantages, there are some considerations to keep in mind.

• Pass-through Taxation: The profits and losses of an LLC are reported on each member’s individual tax return in most situations, regardless of whether or not they received a dividend, or distribution, from the company.
• Taxes: While the income of an LLC is not subject to the traditional “double taxation” that corporations are subject to, in Texas, a business organized as an LLC may have to pay a relatively small amount of Franchise Tax if the business earns more than the No Tax Due Threshold. Those tax rates and no tax due threshold can be found on the Texas Comptroller’s.