LLC Formation Attorney in Houston, Texas
Being your own boss and starting your own business is part of the American Dream, but doing so presents many challenges. In addition to deciding on the type of business most suited for you and coming up with the money to make it happen, you need to consider the legal aspects. How do you protect yourself against claims or judgments that might result from a bad step here or a mistake there?
In a sole proprietorship, the classic mom-and-pop operation, the owner is solely responsible. If they go too deeply in debt or a customer or supplier wins a legal case against them, they have to make good on those obligations or face the consequences.
A corporation offers protection against the owners’ personal assets, but it is a complicated operation to run and administer legally. Probably the best option for one person, or a group of persons, is to open the business as a limited liability company (LLC).
An LLC combines the asset protections of a corporation – no one can seize your personal assets – along with the flow-through tax structure of a partnership. Profits go to the owners, who then pay taxes on them.
If you are looking to form an LLC in or around Houston, Texas, contact Deborah Hubbs, Attorney & Counselor at Law, PLLC. I have helped with several business start-ups in both the for-profit and nonprofit sectors and was also on a team that sold an LLC for $6 billion. I can help you navigate the process to form your LLC and then advise you during its operations when problems or disputes arise.
Deborah Hubbs, Attorney & Counselor at Law, PLLC proudly serves clients not only in Houston, but also throughout Harris County, Montgomery County, and Fort Bend County.
What Is an LLC?
A limited liability company (LLC) is a business structure that combines the best features of a corporation and a partnership, though you can certainly form an LLC as a single owner.
According to the Texas Secretary of State: “Depending on how the LLC is structured, it may be likened to a general partnership with limited liability, or to a limited partnership where all the owners are free to participate in management and all have limited liability, or to an “S” corporation without the ownership and tax restrictions imposed by the Internal Revenue Code. Unlike the partnership, where the key element is the individual, the essence of the limited liability company is the entity, requiring for its creation more formal requirements.”
The owners of an LLC are called “members,” and they can structure the business to be run jointly by themselves, by one member or a combination of the owners, or by management personnel they hire and assign with the duties of daily operations.
The same would apply for a single owner, who could manage everything on their own or hire a management person or team to take charge. Whatever choice is made regarding management, it must be specified when applying for an LLC status with the state.
The Process of Forming an LLC
To form a limited liability company in Texas, you must file a certificate of formation with the Secretary of State. LLCs are governed by the Texas Business Organizations Code (BOC). This governs the formation of an LLC and sets forth the provisions required or permitted to be contained in the certificate of formation.
LLCs are subject to a state franchise tax. Once you form an LLC, you must contact the Texas Comptroller of Public Accounts, Tax Assistance Section, for instructions on how to pay these taxes, if applicable. Federal taxation-wise, the Internal Revenue Service (IRS) considers an LLC to be a “pass-through entity.” In other words, profits go to the members, who then must pay taxes on their personal 1040 filings.
Benefits of Establishing an LLC
Personal liability is always a major concern when starting any business. A sole proprietorship leaves the owner personally liable for any debts, claims, or judgments against them. Sometimes, if things go really sour, the owner may need to file for bankruptcy.
A limited liability company, in contrast, shields the owner or owners’ personal assets against judgments, liens, and claims. The only asset at stake is the cash or other contributions the owners made in forming the LLC. Unless a member (owner) personally guarantees a debt or other obligation, then the LLC itself is responsible for any liabilities.
Pitfalls in Establishing an LLC
As with any business venture, the major pitfall is not doing your homework in advance, or what is often referred to as due diligence. Make sure you get the proper legal guidance in advance to keep your business in full compliance with all local, state, and federal laws and regulations.
On the personal front, if you and a group of friends or associates decide to establish an LLC, there is always the possibility of disagreements to arise regarding the focus and operation of the enterprise.
One member may see the LLC’s goals in one light; the others in another light. If one member assumes operational control, the others may object to the decisions that person makes. In other words, a joint operation can fall prey to the egos and temperaments of the individuals behind its existence.
Forming a limited liability company is like combining the best aspects of a corporation with a partnership. You get the pass-through tax benefits of a partnership and the personal liability protections of a corporation. Even though all you need to do to form an LLC is download a state form, fill it out, and submit it, that only satisfies legal and registration obligations.
You also need to plan carefully and examine every aspect of what will be in store for you once you form the LLC and begin business operations. For that, you can rely on my knowledgeable legal and business experience to help you make plans according to your business needs and goals.
LLC Formation Attorney Serving Houston, Texas
If you’re in the Houston area, or in nearby communities and counties, and you’re considering the formation of an LLC, contact me immediately at my firm, Deborah Hubbs, Attorney & Counselor at Law, PLLC. Make sure to prepare for every possible outcome in advance.