Selecting the Right Business Structure – LLC Vs S-Corp

Posted on by PM Editor

Did you know that Texas is home to 92 Fortune 500 companies? (1) This is not a surprise for many experts because doing business in Texas is much easier compared to many other states. If you are interested in starting a new business in Texas or you already own one that is not incorporated yet, you should take a few things into account. The most important one is to select the right business structure for your business. Typically, people are making a choice between an S-Corp and a Limited Liability Company or LLC. Before we go into details, let us highlight the basics of incorporation.

Why do you need incorporation in the first place?

The fact is that there is more than one good reason for incorporation. Yet, the crucial one is to protect your personal assets from a judgment or from creditors. But, keep in mind that there are many situations when a corporation wants to buy assets, like a corporate vehicle for their employees for example, and the bank that provides the loan will require a personal guarantee. In case you provide such guarantee, then this corporate asset won’t stay protected by the so-called corporate veil. Don’t forget that the same goes for both LLC and S-Corp. Another advantage of incorporation is to get specific tax benefits. Serious business owners are using professional accounting and tax service providers like TaxPM™. These professionals can provide valuable tips and advice related to tax issues.

What’s an S-Corp?

S-Corps are a type of corporations that are one level closer to a different tax categorization. Those who want to opt for S tax treatment must be employees of the corporation. We are talking about so-called pass-through entities that don’t have to pay corporate tax. The income received by the shareholders is taxed as individual income. However, an S-Corp is not allowed to have more than 100 shareholders and every shareholder must be a US citizen or at least a legal resident. In addition, S-Corp shareholders have equal voting power in the company.

What’s an LLC?

Limited Liability Company or simply LLC can usually provide better liability protection compared to S-Corp. This is a very popular option for many small businesses in Texas. Although it’s essentially a pass-through entity just like S-Corp, it can be taxed as a corporation. (2) Most owners like this business structure due to its flexibility. It’s easy to distribute the company income to specific individual members. They pay shares on their tax return. Another great advantage is that LLC doesn’t have a specific management or structure requirements that should be met.

Final Thoughts

No one can say which option is the best because different businesses have different requirements and needs. Generally speaking, LLCs are much better for small businesses as well as for start-ups. On the other hand, S-Corps are a better option for larger companies.

If you are interested in incorporation, use the professional help provided by experienced and knowledgeable experts in this field. Choose TaxPM™ for the best results.

 

Advantages of LLC Formation

Posted on by PM Editor

There are many things that people should think about when they are planning on launching a new business in Texas. One of the crucial things in this process is to select the business structure that provides the greatest advantages to their business operations. According to some statistics, Limited Liability Companies or LLCs are the most common type of business entity in Texas. (1) On top of that, incorporation of LLC is not a difficult task. With the right help provided by true professionals like the ones from TaxPM, you should be able to finish this job without any hassles and in no time. LLC creates an ideal mixture of liability protection typical for corporations and flexibility usually found in partnership. It includes some of the best things from both worlds.

If you are still not sure whether you should select an LLC instead of a corporation, we will provide a list of advantages related to LLCs that should tell you whether your business is the right candidate for LLC incorporation/formation.

It keeps the personal assets protected

If you form an LLC, you will get a chance to keep your personal assets safe from the company assets in cases of company lawsuits. In other words, LLC keeps your personal assets protected at all time.

It can help you with taxation

This is another huge advantage of LLC incorporation because you will have an opportunity to select how exactly you are taxed. The tax rate associated with LLC is linked to the owner’s income. To put it in simple words, you can adjust the taxation and pay less in the end.

It avoids double taxation

As you are probably aware, corporations can’t avoid double taxation at least not completely. Namely, corporations are taking care of these taxes at the corporate level and after that, they are paying the taxes on the income which come in the form of dividends. But, LLC doesn’t have to deal with double taxation. You can file returns, but it’s better to rely on professional accounting services for this purpose.

Flexibility while doing business

In case you are managing an LLC, then you will have more options in how to manage your business. It’s possible to add new members to the business without following lengthy procedures. The main purpose of LLCs is to provide business owners flexible business structures that can help them run their companies smoothly.

It cuts IRS audit risks

When compared to a sole proprietorship, an LLC is at lower risk of audits. In case you are thinking about forming an LLC, then you should know that the risk of IRS audit is minimized. (2)

It allows leasing personal assets

Finally, it is possible to lease your own personal assets to your company. In other words, you can manage your LLC even from your home and report that the LLC is actually leasing the office space (your home) from you.

These are some of the things that make LLC a good option for those looking for the right business structure.

 

Launching a Business in Texas

Posted on by PM Editor

The latest reports have shown that the number of new businesses is stagnating nationwide and Texas is not an exception. (1) However, this doesn’t mean that you should give up on your dream especially if you have a solid business idea and you are determined to succeed. Launching a business in Texas is a smart idea for more than one reason. This is a state with low taxes, business-friendly laws, excellent infrastructure and other things that make it an ideal business location. In this article, we will highlight a basic guide to launching a business in Texas.

  1. Choose the best business structure

If you want to support the growth of your business, you should create an adequate structure from the start. There are a few different types of business structures including sole proprietorships, corporations, partnerships and limited liability companies. Select the one that suits your business needs and plans. If you make the right decision, you can expect tax breaks and a wide array of benefits. That’s why it’s a smart move to talk to a professional in this field. TaxPM is definitely the place where you can find such help.

  1. Registration

Once you select the right business structure, you will have to register your business with the Texas Secretary of State. The only exception is sole proprietors, but they usually have to register with their counties of operation. It is possible to register a business over the Internet or use your local county clerk office. One of the crucial steps in this procedure is to find a unique name for your business. Do this carefully because a business name can be a deal maker or a deal breaker for many modern consumers. (2)

  1. Check the permits

The next step is to learn more about the permits, licenses, certifications, and registrations that your business might need. There is no general business license in Texas, but almost every industry comes with regulatory agencies. Those selling taxable goods or providing taxable services should apply for sales and use tax permit.

  1. Create bank accounts

When it comes to taxation, this is one of the most important steps. Companies need EIN (Employer Identification Number) provided by the IRS. Sole proprietors can use their social security number for tax purposes. It’s possible to get an EIN online.

  1. Start promoting your business

There are thousands of businesses in Texas which means that you have to do something to get noticed. The last step of the process is to start promoting your new business. The good news is that there are many different marketing options for businesses today. So, you can use some classic forms of marketing like newspaper ads or TV commercials, but you can also use Internet marketing which has proven to be even more effective today.

If you want to speed up this process and finish it in the best possible way, feel free to contact TaxPM – our experts will be glad to help you.