What are the benefits of a LLC?
LLCs offers benefits such as limited liability, tax benefits, legitimacy in business dealings, creating a structure for operations, and remaining personally anonymous.
A LLC is an entity having its own legal rights and obligations, of which the owners are not. This allows for compartmentalizing liability and asset protection which is one of the main and most common reasons for using a LLC.
LLCs can offer tax benefits in that the IRS doesn’t recognize LLCs so the IRS allows you to designate how you want to be taxed and you can be a pass through entity. In certain situations, you can save on Medicare and Social Security taxes by structuring the Member’s compensation and distributions but this should be planned and discussed with your tax advisor.
A LLC offers legitimacy to doing business. A LLC is an officially created entity which is formed and registered with the Secretary of State in the state of Texas. “Bob’s Builders, LLC” sounds legitimate than “Bob Smith dba Bob’s Builders”.
A LLC should have a Company Agreement (sometimes called an Operating Agreement) which governs how the LLC is operated. Chapter 101 of the Texas Business Organizations Code defines what should and can be included in a Company Agreement. When a LLC has more than one Member, the Company Agreement is important to outline how the LLC will operate and the relationship of the Members.
LLCs offer some anonymity in that all contracts or transactions should be done in the name of the LLC rather than one’s personal name. If there is a dispute or if liability is incurred, it should be the LLC which is sued rather than the Members individually.
These are just some very basic concepts related to LLCs. If you think a LLC would benefit you, we would be happy to help you with your LLC. Please call 830-625-9300 to schedule a time to meet with a lawyer who can help with your LLC.