In recent years, an LLC entity has become an increasingly popular way to register a business for first time business owners and entrepreneurs. Texas is largely acknowledged to be one of the best states to register an LLC in due to their strict state laws around personal liability protection and their quick and easy registration process.
What is an LLC and Why are They So Popular?
An LLC is a distinct type of business entity that provides, as suggested in its name, limited personal liability protection for its members. LLC’s are a largely popular type of business entity because, among other things, this type of entity offers personal liability protection for any debt, obligation or liability incurred during the course of the business entity’s operations. An LLC is also considered to be an easy and relatively inexpensive way to register your company and maintain peace of mind when it comes to risking you personal assets, credit score and reputation.
What are the Benefits of Forming an LLC?
Limited Liability Protection
LLC’s provides its members with a legal separation between them as an individual and the business. They cannot therefore, under normal circumstances, be held liable for any legal and financial liabilities incurred by the company in a personal capacity. This protection of personal assets is a key factor in the LLC’s popularity among small business owners as it grants them the freedom and peace of mind, they need to take necessary and calculated risks they should and not have the threat of bankruptcy or a lawsuit hanging over them. This type of business is particularly popular in Texas because the laws around “piercing the corporate veil” or breaking through that created separation between entity and personal liability are particularly tough and the state regulations provide welcome additional protection for business owners as a result.
Flexible Tax Filing Choices Offered by the IRS
When registering your LLC, you are able to voluntarily choose how you want the IRS to tax your company. LLC’s can choose to be taxed as a corporation (an s-corp or a c-corp), a partnership or if it is a single member LLC, as a sole proprietorship. The opportunity for entities to choose for themselves which tax method would work best for them means that business owners will feel that they have a sense of authority over their companies’ tax affairs as well as saving themselves loads of administrative time and money along the way instead of paying unnecessary taxes.
Flexible Dividends Sharing
Unlike corporations, how an LLC distributes its profits is entirely up to the members and they are not required to be distributed according to ownership share ownership. Profits can be allocated according to an agreement amongst members on an ad hoc or structured basis, it really comes down to what the members would like to choose to do and
Unlimited Member Count
LLC’s also legally allow an unlimited number of members to join the entity, as well as allowing foreign nationals to serve as part of the member body. LLCs are popular because with this kind of structure, they are able to have the potential to facilitate access of foreign investment funds and don’t restrict the number of members who are able to join the LLC as members.
Texas is an excellent place to register your LLC and the many benefits of registering your business here far outweighs any negative aspects of an LLC. No business model can be perfect, but it’s important to do your research and determine exactly what kind of model is right for you. For more information about how to form and register an LLC from the professionals, read more here.