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Forming a Texas LLC
What is an LLC?
The acronym "LLC" stands for "Limited Liability Company." An LLC is a flexible hybrid entity that combines the most favorable features of a corporation and an unincorporated business. An LLC shields its owners from individual liability in the same way a corporation does, but receives the more favorable income tax treatment of a partnership or sole proprietorship.
Do I need to form an LLC if I want to be a solo free-lance consultant?
It's a good idea. Many companies prefer doing business with an
LLC rather than an individual, in part to make clear to the government that the consultant is not an employee of the company and is thus not subject to withholding and other employment legal requirements.
Can I have an LLC with just one owner?
Yes. An LLC can have any number of owners, from one to as many as you like.
Does an LLC need a board of directors or officers?
No.
What is an "agent for service of process"?
Under Texas law, every LLC (and corporations, limited partnerships, and other limited liability entities as well) must appoint a person or company that has a physical address in Texas to be available to accept service of process, in the event someone files a lawsuit against the LLC in Texas. The LLC cannot serve as its own agent; and the agent must have a premises that is open to the public during normal business hours. Our firm serves as agent for our LLC and corporate clients.
Is it better to form an LLC in Delaware than in Texas?
No. Back in the old days, Delaware law was very "progressive" and well-settled; and it offered companies significant advantages over other states. Most other states, including Texas, have now caught up. There are a handful of particular circumstances in which Delaware and Nevada law are still more favorable, but in most cases a Texas LLC is an excellent choice.
If I have several different businesses or income-producing properties, do I need a separate LLC for each one?
Yes, but we can streamline the process. It is important to insulate the assets of each business from potential liabilities of the other businesses or properties, and separate LLCs have until recently been the sole option to accomplish that goal. However, as of September 2009 in Texas, one can form "Series LLCs" within a single umbrella entity (in much the same way as a parent corporation and subsidiaries), so that the costs of formation and and administration are minimized while still shielding the individual businesses and properties from each other to the full extent of the law.
Will Texas tax my LLC?
Texas has no income tax. However, it does have a state franchise tax of either 1% or 0.5% (depending on industry) for LLCs and other limited liability companies with net revenue in excess of $1,000,000 (and this number changes yearly). All LLCs, whether or not they have any tax liability, must file a simple annual report, which can be completed online.