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Starting an LLC in Texas: Three Major Benefits

Jul 8, 2008
Starting an LLC in Texas is a smart move for most business owners. A Texas limited liability company is one of the best creations of the Texas legislature. It provides business owners with a solid layer of protection from limited liability and the most tax choices of any other legal entity.

The Texas LLC is About Limiting Liability

First and foremost, the main reason for starting an LLC in Texas is to allow you to start a business without exposing yourself to substantial risk of loss for engaging in such a rewarding endeavor.

Without a limited liability legal entity, you could operate your business as a sole proprietorship but you would be exposing everything you own to risk of loss. Everything means everything- your home, cars, hard earned personal savings, jewelry, and anything else you own.

The Texas limited liability company provides a fundamental layer of protection between owners of a business and the business obligations and liabilities. While this is such a great thing or small business, this layer of protection does have some limitations. But having it is greatly preferred to not having any insulation from business related liability and lawsuits.

Tax Choices

The tax choices you receive when starting a Texas LLC is the second reason why the Texas limited liability company is popular among small business owners. The IRS passed the popular Check the Box regulations in 1997 which allows the business to decide for itself how it wants to be taxed.

After those tax regulations were passed, a limited liability company can now receive limited liability and allow its members to manage the business while at the same time qualifying for a single layer of pass through taxation for federal income tax purposes.

In addition, for those businesses which prefer corporation taxation, a Texas limited liability company can elect C corporation or S corporation taxation if it chooses and still get the simplicity and flexibility of a Texas LLC without the formalities of a corporation under state law.

Please note that in Texas there is no state income tax but the business entity may be subject to a franchise tax. You can visit the Texas Comptroller office for more details on this tax.


An official Texas legal entity exudes an official and professional business to the public. After all, the owners of the business took the effort to start a Texas LLC by complying with the state laws and completing the organization process.

In the world today where anyone can come up with a business name and call themselves a business, having an LLC as your business entity goes a long way in differentiating your business and reducing the risk in the eyes of your customer that you are not a serious or trustworthy business.

Requirement for Starting an LLC in Texas

The overall Texas requirements are still straightforward and given the number of Texas limited liability companies formed each year, many, many business owners are taking advantage of the benefits.

The most challenging part of starting an LLC in Texas is coming up with a name that is available for use in Texas. This is challenging for two reasons. First, there are many names already being used in Texas. Second, the Texas state agency that determines name matters is very strict about allowing a name that is too similar to another name.

For example, Texas is famous for the two name rule. If your LLC name has two words that are identical to two words in another Texas legal entity name, it cannot generally be used even though there might be an added third word. For example, the name Lawn Doctor Houston, LLC cannot be used if there is already being used any of the following names: Lawn Doctor, The Fastest Lawn Doctor, or Lawn Doctor and Nurse.
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