Everything You Need to Know About LLCs in Texas

The United States (US) is famous for its welcoming yet competitive business culture. Establishing a business in the US is easy. This is because the country promotes the idea of free enterprise and competition. For business-minded people worldwide, starting a business in one of the world’s most culturally diverse countries can be an exciting venture.

But can you exactly start a business in the US if you live on the other side of the globe? Luckily, incorporating a Limited Liability Company (LLC) in the US is generally the same in and out of the country, whether you live here or not.

But, there is still a lot to learn and understand when establishing a company in the country. Here is a quick overview and guide for the people interested in incorporating it in the US.

What Is A Limited Liability Company

A limited liability company (LLC) is a distinctive business structure. It combines features from a partnership and a corporation. Also, LLCs have the same liability protection as a corporation. But it also has the flexibility of an unincorporated business. But like a partnership, an LLC can be a pass-through business entity. It can avoid double taxation by having company profits taxed as a personal income.

Single-Member LLC vs. Sole Proprietorship

LLCs can either be formed as a single-member or a multi-member company. An LLC owned and managed by a single individual is a single-member LLC. While multi-member LLCs involve two or more persons. But what makes single-member LLCs different from sole proprietorship?

Single-proprietorship recognizes that the business and its owner are the same. Thus, any business-related debt or liability is the personal responsibility of the owner. Therefore, the proprietor’s assets can be taken in place of company debt and obligations.

Meanwhile, a single-member LLC is seen by the court as two separate entities. This protects the owner’s assets and property from any business-related liabilities.

LLCs vs. Corporations

LLCs and corporations are two of the most common business types for new entrepreneurs. This is because they provide business owners protection from company-related debt and liabilities.

But, there are several notable distinctions between LLCs and corporations. Differences in ownership, management, and taxation can make one better than the other.

Ownership in corporations is defined through shares. Investors can either buy or sell shares in the company to own a percentage of the business. But, the management of the company operations does not rely on the shareholders.

Instead, an assigned Board of Directors handles business decisions. A company shareholder can profit even without dealing with the business operations. This feature of corporations makes it attractive and suitable for outside investors.

Meanwhile, an LLC can either be owned by a single member or several members. Unlike corporations, LLC members have the freedom and flexibility to distribute ownership to their members.

Distribution of ownership is regardless of financial contributions to the company. For management, LLC members can self-manage their business or hire a manager.

The process of taxing LLCs and corporations is also different. Corporations go through double taxation. This is where tax deductions occur on company profits and the shareholders’ income. LLCs can choose to pay their taxes as a pass-through entity or a corporation.

Things to Consider Before Forming an LLC in the US

As mentioned earlier, starting a business in the US is relatively easy, even if you are a non-citizen. But there are still things that you should consider before filing an LLC application. Here are some of the things that you should consider:

Best States to Incorporate in the US

Business policies and regulations in the US differ from state to state in the US. This means that some states are friendlier for businesses and entrepreneurs than others. Wyoming, Nevada, and Delaware are particularly popular when it comes to establishing LLCs. Below is a roundup of the benefits of forming an LLC in Wyoming, Nevada, or Delaware:

Wyoming

No state income tax for LLCs
Strong charging order protection for single-member LLCs
Relatively lower processing fees

Nevada

Anonymous LLCs for privacy
No state income, corporate, or franchise tax
Does not require operating agreements or annual meetings for LLCs

Delaware

Strong asset protection against creditors
LLC privacy protects owner information from the public
Specialized business court to settle disputes

Process of Forming an LLC

After deciding where to form your LLC, it is essential to familiarize yourself with the steps involved in establishing your company. The general process of LLC formation goes as follows:

Choose a special and distinctive name for your company. A unique company name is not the same or closely similar to any LLC already registered in the state. Also, most states need business owners to include an LLC indicator in the company name. This allows states to identify that the business is a limited liability company.
Find and hire a registered agent or service provider. The registered agent can either be a company or an individual. The agent is an acknowledged entity allowed to accept legal papers on behalf of the LLC. Registered agents and service providers are also allowed to do the LLC incorporation process. Our friends at Doola can help you start an LLC fast and easy.
File your LLC’s Articles of Organizations. This form will need your LLC’s name, details of your registered agent, and other company information.
Accomplish and file your LLC’s operating agreement. Although most states do not need the operating agreement upon formation, this internal document is like a blueprint for your company’s operations, management, and organization.
Complete state-specific business and tax requirements. This may include getting a business license, obtaining an IRS Employer Identification Number (EIN), and registering with the involved state taxing authority.

Establishing a business is a significant life decision. It would take a lot of courage, effort, and resources to build a successful business from the ground up.

So if you plan to start your own company, consider forming an LLC in the US for that soft cushion of limited liability. LLCs provide aspiring entrepreneurs with the protection they need as they dip their toes into the business industry.