When you are starting a business, the choice of entity will have a major impact on matters including the owner’s legal and tax liabilities. Depending on the nature of your business, the limited liability company structure can provide a range of benefits.
Speak with a Dominion limited liability company (LLC) formation lawyer about your choice of entity. Our seasoned business attorneys at Begum Peláez-Prada PLLC could help entrepreneurs understand the benefits of LLCs compared to other entity structures.
One of the most important factors when deciding the right entity for your business is protecting an owner’s personal assets. Choosing a certain legal structure can impact whether a business owner is personally liable for the company’s debts.
For example, creditors can pursue the personal assets of a business owner in a general partnership to recover debts owed by the company or for legal claims against the company. However, the LLC structure generally limits the owner’s personal liability to their investment in the business.
To form an LLC, the owner will need to file a certificate of formation with the Secretary of State. The owners of an LLC are referred to as its members, but you can also form a single-member LLC.
The company’s owners will also need to draft an LLC operating agreement to govern its operation. The LLC structure provides members with flexibility in the company’s management structure.
All of the members may participate in managing the company, or the agreement can provide some members with a more passive investment role. Another business entity, such as a partnership or corporation, can also hold a membership interest in an LLC.
When forming your LLC, a Dominion lawyer could advise you on drafting and forming operational agreements that tailor the company’s management structure to suit the members’ needs.
In addition to protecting the members from personal liability, the LLC structure also provides certain tax benefits. The Internal Revenue Service allows LLCs to elect whether they are taxed as corporations or partnerships.
Unlike partnerships, corporations are subject to double taxation. Corporations are separate legal entities that must file and pay taxes at the corporate level. When corporations pay dividends to their stockholders, these investors must also pay taxes when reporting the distributions on their personal tax returns.
Partners or owners in general partnerships can take advantage of “pass-through” taxation. Profits made by the partners are only reported on their personal tax returns, passing through the company.
With these tax benefits, LLCs are popular for owners who wish to avoid personal liability for company debts while taking advantage of pass-through tax benefits. A Dominion lawyer could help you consider the tax implications based on your entity choice during LLC formation.
In addition to the general LLC structure, there are certain types of specialized LLCs in the state, including the following:
Texas Business Organizations Code Annotated § 2.008 generally prohibits for-profit corporations from operating as a nonprofit institution. However, LLCs are not subject to this prohibition.
A professional LLC is formed to provide a professional service, such as a physician or attorney.
A series LLC is a special structure that allows the company to segregate its membership interests, assets, and operations into separate business segments or series.
Before forming your entity, a Dominion lawyer could advise you if one of these LLC structures is appropriate based on the needs of your business.
When deciding which entity is right for your business, a Dominion limited liability company (LLC) formation lawyer could advise you through this process.
Contact our firm immediately to discuss your situation with Sasha Begum, an attorney with a big law background and experience serving as in-house counsel. Sasha has experience, knowledge, and a great team of legal professionals that will support you.
