As new business owners, one of the first steps people take often includes choosing a business structure type. Among several other options, a limited liability company is a common organization choice for those with medium- or higher-risk businesses.
Before structuring their fledgling businesses as limited liability companies, however, it behooves business owners to understand what structuring as an LLC means for their ventures and their operation.
Taxes
According to the U.S. Small Business Administration, organizing as an LLC allows businesses to avoid paying corporate taxes. Rather, the profits and losses of these companies pass through to the owners, known as members. Members also bear responsibility for Medicare and Social Security self-employment tax contributions.
Liability
Although enjoying the tax benefits of a sole proprietorship or partnership, an LLC has the liability protection of a corporation. In the event of bankruptcy or a lawsuit, structuring as an LLC protects the personal assets of the LLC members. Therefore, members do not risk property, such as banking accounts or homes, to pay off the debts of the LLC.
Management
According to the Texas Secretary of State, LLC members may choose to establish an alternative management structure instead of operating their businesses themselves. Under such circumstances, the members still govern the LLC. However, they may choose a manager or group of managers to handle the day-to-day tasks of their companies.
When forming a new business, many people focus on the idea, the plan, and getting their products or services to market. However, choosing a structure type and legally setting up their companies may play almost as essential of a role in the longevity and success of their ventures. Speak with an experienced Houston business formation attorney today by contacting us online or by calling (713) 300-9662.