Traditionally, business entities were limited to a sole proprietorship, partnership, or corporation. Many states, including Texas, created a new type of entity, the LLC, by statute. A limited liability company (LLC) is an attractive option for small business owners because it provides the protection of a corporation, but the flexibility of a partnership or a sole proprietorship.
IS AN LLC RIGHT FOR MY BUSINESS?
An LLC provides you with the necessary legal formation, i.e., the ability to conduct business in Texas legally, and it establishes a legal presence within the state. It allows you to do all of the necessary things you need to run your business, such as open a business bank account.
ADVANTAGES OF AN LLC
- Limited liability - Members of the LLC are protected from liability for acts and debts of the LLC.
- Asset separation - Keep your business and personal assets separate. This has both legal and tax benefits.
- Flexibility in taxation election.
- Can be set up with a single member.
- No requirement of an annual general meeting for shareholders.
- No loss of power to a board of directors (unless otherwise specified in an operating agreement).
- Less administrative work and recordkeeping.
- Membership interests of LLCs can be assigned, and the economic benefits of those interests can be separated and assigned, providing the assignee with the economic benefits of distributions of profits/losses (like a partnership), without transferring the title to the membership interest.