Legal Question in Business Law in Texas

Re: Should I Incorporate or LLC?

Howdy:

The form your company takes is completely your preference, and it's really a toss-up as to which to choose.

Both forms, if properly set up and run, will provide protection for your personal assets. Remember, though, that you are personally liable for your own negligence, and a business form will not necessarily protect you. But, you will be protected from liability for debts and actions of the corp. Again, provided you run the business as a separate business, and not as a extension of yourself. I hope that makes sense.

A traditional corp will inherently exist forever; while an LLC ... like a partnership ... can run into longevity problems when a member dies or quits. Proper planning can avoid these problems.

But, an LLC will give you more operating flexibility than a corp. You will have the option of being taxed as a partnership (passing profits and losses directly to members for tax purposes) or as a corporation (filing its own returns, and then paying distributions later).

There are also limitations on the earnings an LLC can retain, which corporations don�t face. Well, S Corps do, but an LLC makes more sense than an S Corp.

If you are part of an investment group, I think a corp would be better to use; but if it�s just you and your husband, than an LLC would probably make more sense. That�s what we use for an apartment building we own.

Hope this helped.

rkr

Re: Should I Incorporate or LLC?

The choice depends upon your long-term goals, whether you would bring in other investors, and tax planning.

If it's just you and your husband, with no intent of expansion, the LLC is probably the better form. Bear in mind that the simplicity of managing an LLC can sometimes lead to making it a personal extension rather than a separate entity. A corporation forces a structure of operation, if formalities are followed, to maintain the corporate shield.

Take a look at our website, www.bradie-law.com, as to what corporations are and do, versus partnerships or LLCs.