Starting a Business in Texas? Watch This First!

If you’re starting a business in Texas, you’ve probably already Googled, “Should I start  a corporation or an LLC, and then you were met with five different answers, 10 different charts,  and tons of legal jargon.” So, let’s cut through the noise. I’m Jennifer Nichols, founder of Jay  Nichols Law, where we help individuals and business owners plan and protect what matters  most. Today, I want to walk you through a question I get all the time from new business owners.  Jennifer, should I be an LLC or a corporation?

 There’s no one-sizefits-all answer here. The right  decision depends on your goals, how you want to run your business, and the type of future you’re  building toward. So, let’s break it down in plain terms. Let’s start with what they both have in  common. Liability protection.

Whether you choose an LLC or a corporation, both structures will  protect your personal assets from business debts or lawsuits. That means your house, your savings,  your car, those are generally off limits if your business gets into trouble. That’s a big reason  people form either one.

Now, let’s look at the differences. LLC or limited liability companies  are often the go-to choice for small businesses, family-owned companies, and startups.

Here’s  why. Taxation. Most LLC’s in Texas are taxed as pass through entities. That means the income is  reported on your personal tax return. And since Texas doesn’t have a personal income tax, that’s  often a very efficient setup.

Management. You don’t need a board of directors. You can manage  it yourself or bring in someone else to manage it for you.

That’s great if you want to keep things  simple. Flexibility.

Company agreements can be customized to fit your unique situation. Want  three co-owners who each have different roles and pay structures? You can do that. Limitation. The  main trade-off.

LLC’s can’t issue stock. So, if you’re planning to bring in big outside investors,  that could be a hurdle. Now, corporations.

These are better suited for businesses aiming for  serious growth, taking on investors, or maybe going public someday. Taxation.

Corporations  can be taxed two ways. A CC Corp gets taxed twice. Once on profits and again when profits  are distributed to shareholders. But you can also choose escorp status for pass through taxation if  you qualify. Structure.

You required to have a board of directors, officers, and shareholders.  It’s more rigid, but that’s also what gives investors confidence. They know how things  are supposed to run. Capital raising. Here’s the big perk.

Corporations can issue stock. That opens  the door to raising serious capital. So, how do you choose? If you’re starting a family business,  consulting company, or a small shop with no outside investors, LLC is probably your best bet.  If you’re building a business with high growth goals or want to bring in outside investors,  a corporation is the stronger choice.

And remember, this isn’t something you have to guess  on. I help business owners think through these decisions because choosing the wrong structure  can lead to a lot of costly restructuring down the line. So, here’s what to take away.

Both  LLC’s and corporations protect your personal assets. LLC’s are simpler and more flexible.

  This is great for small, closely held businesses. Corporations are better for formal structure,  investor confidence, and raising capital. If you’re still unsure which direction to take,  let’s talk. At Jay Nichols Law, we’re here to help you build your business on a strong foundation.  Reach out for a consultation and let’s make sure you’re set up for success from day one.

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