As an entrepreneur, you want your startup to not only grow and prosper, but also to give you tax and personal liability benefits. If you currently have a sole proprietorship or partnership, you may want to consider switching to an LLC, that is, a Limited Liability Company, instead.
MoneyUnder30.com explains that an LLC gives you the personal asset protection you desire, while also relieving you of the double taxation inherent with corporations.
Personal asset protection
Basically, an LLC creates a buffer between you, and therefore your personal assets, and your business. No business creditor or judgment holder can come after your personal assets to pay your business’s debts or judgments. In fact, an LLC offers more personal asset protection than any other type of business entity. While this limited liability protection naturally does not extend to willful misconduct or criminal acts on your part or that of your partners, it does cover virtually all day-to-day business operations.
No double taxation
An LLC neither pays its own income tax nor files its own income tax return. Rather, an LLC works like a partnership when it comes to income taxes. You and any partners you have pay your respective shares of the LLC’s profits and take your share of its losses, both as set forth on the Schedule C that you attach to your respective personal income tax returns.
The first step in forming your LLC consists of deciding what name you want it to carry. Then you will need to do a state-wide business name check to make sure that the name is available. Keep in mind that Texas law mandates that your LLC name must include “Limited Liability Company,” “Limited Company,” “L.L.C.,” “LLC,” “L.C.,” “LC” or one of the approved abbreviations, such as “Ltd.,” “LTD” or “Co.” In addition, your business name must be sufficiently different from any existing Texas business that no one will confuse the two.