There are many resources available to help startup business owners, ranging from friends, mentors, professionals, and a plethora of internet sites. In Texas, one of the most popular business formations is the Limited Liability Company (LLC).
While most startup business owners attempt to be cost-effective in their formation, there are some areas where proper advice and guidance can be well worth it down the road. For example, the Texas Secretary of State offers a comprehensive guide to selecting a formation and even includes information about fees and filing.
However, selecting an entity isn’t always that easy or simple. Anyone involved in a startup has big ideas and ambition for success. Yet at the same time, there are many traps to building a foundation for success. One of the most overlooked implications of selecting a business formation is the tax consequences. Taxation is something that is often overlooked at the beginning of a business venture, but can have serious implications when there is substantial growth in the company.
Texas law allows for several tax favorable options depending on the size and income of a company. For a primer on the overall differences between a LLC and a S Corp (a potentially tax-favorable entity), you can read this article: “LLC vs. S Corp: Which Is Right For You?“
In the end, if you are considering taking the formation leap, make sure you consult an attorney and an accountant for guidance. Taking the time and money to build a strong foundation for your company will save many headaches and expenses in the future.