A limited liability company (LLC) is a legal type of business structure that offers the pass-through taxation benefits of a partnership or sole proprietorship with the limited liability benefits of a corporation. Owners of an LLC therefore aren’t personally responsible for the debts or obligations of their business. It also means that any business income or losses pass through to the owner and are reported on their personal tax returns, which makes it easier to manage year-end taxes. This differs from a partnership or sole proprietorship where the business owner is not protected from being responsible for any business debts or obligations. It also differs from a traditional corporation such as a C-corp, which offers limited liability but is subject to double taxation. For this reason, anyone starting a business should consider incorporating as an LLC for liability and tax reasons. Whether you want to register LLC in Texas as a single person or with multiple owners, there are options to fit your needs. LLCs can be either single-member or multi-member as well as member-managed or manager-managed. A single person owns single-member LLCs. At the same time, multi-member LLCs have more than one owner and operate similarly to a partnership, splitting profits and losses based on ownership shares. Member-managed LLCs are managed collectively by the member or members, while a manager-managed LLC is managed by a third-party manager or by a subset of its members.
Fore More Information:
Regardless of member and management structure, LLCs are incorporated in a specific state but can operate nationally. Each state may have its own rules regarding LLCs, but the overall legal structure is the same regardless of which state you use to incorporate. Companies such as LegalZoom can help you incorporate in any of the 50 states based on individual state requirements.
TYPES OF LLC
There are many types of LLCs available to business owners. Some are recognized by all 50 states while others are only recognized by some states. Let’s now take a look at the process of LLC application Texas, most common types of LLCs, including what they are and who they’re best for.
- Domestic LLC
Domestic LLCs, particularly prevalent in the realm of free LLC in Texas, are the most common type of limited liability company and are subject to the specific laws and regulations of the state in which they are formed. This differs from a foreign LLC that is incorporated in one state but operates in other states. Most small business owners, real estate investors, freelancers and consultants should consider a domestic LLC.
- Foreign LLC
A foreign LLC is a type of domestic LLC that’s formed in one state, the domestic state, and registered to do business in one or more other states. A foreign LLC therefore operates in multiple states even though it’s incorporated in only one state. To be considered a foreign LLC, businesses need to maintain offices or a physical presence, regularly solicit business, own or lease real estate or more in a foreign state. Foreign LLCs that meet these requirements must register with the foreign state’s filing office.
- Professional LLC (PLLC)
A professional LLC, also known as a PLLC, is a type of limited liability company used by licensed professionals, such as doctors, lawyers and accountants. Professional LLCs are similar to domestic LLCs with added requirements and restrictions for licensed professionals.
For example, professionals must adhere to a code of conduct for their profession. All PLLC owners also must be licensed professionals for which the LLC was formed with any necessary permits. PLLCs are recognized in 29 states.
- Nonprofit LLC
A nonprofit LLC is a type of corporation formed with the intent of conducting charity work or public benefit activities. A nonprofit LLC is similar to a standard LLC but includes additional benefits and requirements. For example, to become eligible for a nonprofit LLC, your organization needs a public mission, restrictions on profit distributions, limited ownership and must follow nonprofit regulations established by the state in which it’s incorporated.
However, nonprofit LLCs receive certain advantages, such as tax-exempt status. This means that they don’t pay taxes and donors can receive tax advantages for charitable contributions.
- Low-Profit LLC (L3C)
A low-profit LLC, also known as an L3C, is a blend of a traditional LLC and nonprofit LLC offered in 15 states. It offers similar liability protection to its business owners but requires the business to pursue a social mission. Unlike a nonprofit LLC, it can generate revenue and profit and is subject to pass-through taxation. On the other hand, it can receive certain tax benefits such as tax deductions for charitable contributions.
- Series LLC
This type of liability company offers advanced liability protection since each sub-LLC operates as its own legal entity. It also offers streamlined business management since all LLCs can be managed under the primary umbrella LLC. Series LLCs can be taxed separately or as part of the primary LLC. Series LLCs are only recognized in 19 states and are best for those wanting to protect various business assets from the liability of another using their own LLC entities.
- Anonymous LLC
An anonymous LLC is a lesser-used type of LLC that’s only offered in three states. Anonymous LLCs offer the same benefits as a traditional LLC but offer advanced privacy protection for its owners. This may be the right business structure for public figures or businesses that own assets—such as intellectual property or art—and want to maintain ownership anonymity.
- Restricted LLC
A restricted LLC, only offered in Nevada, can’t be taxed or make profit distribution for 10 years after formation and is used primarily to transfer assets from one party to another. It allows you to transfer assets without paying taxes and also protects you from the liability of the transferred assets.
CONCLUSION
Limited liability companies (LLCs) are corporate structures that protect you from the debts and obligations of the business, provide pass-through taxation, as well as offer a range of other benefits. There are many types of LLCs, which include domestic LLCs, foreign LLCs as well as LLCs for the nonprofit sector. The right LLC for you will depend on your specific situation. When deciding on a type of LLC, first determine your unique requirements then choose an LLC that offers the most benefits.
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