If you run a company in Texas under a DBA (Doing Business As) name, you might be thinking about switching to an LLC (Limited Liability Company). An LLC has the advantage of protecting the owners from personal liability, which keeps their assets separate from those of the company. However, you might be curious about whether you can domesticate your LLC in Texas and how it works.
You can domesticate your LLC in Texas, to put it simply. Domestication, the process of moving your LLC from one state to another, enables you to preserve the legacy and legitimacy of your business. You must submit a Certificate of Conversion to the Texas Secretary of State in order to domesticate your LLC in that state. The name of your LLC, the state it was initially founded in, and the conversion’s effective date are all included in this document, which converts your LLC from its original state to Texas.
In Texas, changing your DBA to an LLC entails a different procedure. You must submit a Certificate of Formation to the Texas Secretary of State in order to achieve this. This paperwork creates your LLC as a legal entity in Texas and contains crucial details including your LLC’s name, the reason behind your company, and the name and address of your registered agent.
Even though switching to an LLC offers many advantages, some business owners might choose a S corporation. An S corp does have some drawbacks, though. For instance, S corporations must adhere to tight ownership regulations, which stipulate that they must be owned by either individuals or specific kinds of trusts and cannot have more than 100 shareholders. Furthermore, S corporations are restricted in the kinds of shares they can issue, which can make acquiring cash more difficult. If you are a stakeholder in a S corp, you are not regarded as self-employed; rather, you are an employee. This implies that you are in charge of paying yourself a salary that is reasonable and subject to payroll taxes. Any profits above your pay, however, are exempt from self-employment taxes.
Finally, some LLCs may decide to file their taxes as S corporations. With this option, business owners can pay themselves a fair income and then receive any remaining earnings as distributions that are exempt from payroll taxes. This can result in tax savings for them. However, there are also stringent restrictions for this election, such as that all shareholders must approve it and that the firm owners receive a fair wage.
Conclusion: Even though Texas offers a wide range of options for business structure, changing your DBA to an LLC or domesticating your LLC in Texas can offer significant personal liability protection for the owners. Before making a choice, it’s crucial to carefully weigh the benefits and drawbacks of various business forms, including S corps.
I’m sorry, but the post is not about creating a S company; it is about domesticating an LLC in Texas. As a result, it does not include information on how much it would cost to incorporate a S corp in Texas.
It is not directly addressed in the article “Domesticating Your LLC in Texas: What You Need to Know” if a S corp is worthwhile. However, it does go into the advantages and disadvantages of setting up an LLC in Texas, including the liability protection it offers to its owners, the simplicity of formation and management flexibility, and any potential tax repercussions. The value of a S corp will rely on the particular requirements and objectives of the business owners and should be assessed on a case-by-case basis. To find out if a S corp is the best option for a specific firm, speak with a legal or financial counsel.