An LLC is a limited liability company. This hybrid business entity provides the limited liability features of a corporation as well as the tax efficiencies and operational flexibility of a partnership. There are no owners in an LLC, but rather members. In the state of Texas, a member can be an individual, partnership, corporation, trust, and any other legal or commercial entity.
A Texas limited liability company is created by filing a certificate of formation with the Texas Secretary of State. The Secretary of State provides a form that meets minimum state law requirements. Online filing of a certificate of formation is provided through SOSDirect.
What are the advantages of an LLC?
- Limited liability: Members are protected from personal liability for business decisions or actions of the LLC. The liability of the members is generally limited to their investment.
- Structural flexibility: An LLC can be managed by managers or its members, as determined by the LLC and its members.
- Less record keeping: Compared to an S-Corporation, there is less registration paperwork and there are smaller start-up costs.
- Pass-through tax treatment: Profits and losses are “passed through” the business to each member of the LLC.
- Sharing of profits: Members distribute profits as they see fit, with the flexibility to decide who has earned what percentage of the profits or losses.
Although an LLC can be formed by filing online, persons contemplating forming an LLC are advised to consult competent legal counsel or financial experts. Learn more about Millan & Co.’s business incorporation services or call 512-479-6819.