What is an LLC by David Disraeli

David Disraeli

LLC stands for “limited liability company”.  This type of entity is a hybrid between a partnership and a corporation.  The LLC takes the best features of corporations, like easy transferability of ownership and voting, appointing officers and combines it with the limited liability that partnerships offer.  Most importantly, LLC’s are extremely flexible and are tax neutral, with the exception of Texas franchise tax. This year, there is no tax due until your company hits $1.1Mil in annual revenues.  See Texas Comptroller for details.  Otherwise, the company may be treated as a partnership or a sole proprietorship (only available to single member LLC’s or husband and wife LLCs).

LLC’s can be used for asset protection and estate planning or to simply look professional.  In Texas, an LLC is either member managed or manager managed.  Unlike a typical corporation where each share gets one vote, and therefore the largest shareholders can dictate the operations of the company, an LLC is managed by officers who are appointed by the founders, generally themselves.  In the case of an LLC where there are many members, management does not want to have members meddling in the day to day operation of the company.  A member-managed LLC is similar to a corporation in that each member has a vote relative to the number of member units they own (shares).  If it is a manager-managed LLC, the manager is the one who makes all the decisions, regardless of what the members want.  This said, a proper LLC must file with the secretary of state an organizational document naming a registered agent and whether the LLC is going to be member managed or manager managed.  The LLC should also have an operating agreement (bylaws) that spell out how the LLC is going to operate, who can purchase units and dozens of other details. Call now for a free quote: 512-464-1110
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