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Business Structuring


It is very important to determine how to structure your Business and to make certain the the structuring plan takes into consideration the securities, tax and operational considerations of your business plan. Many People use online services to set up business entities in other states or use pre-printed forms to establish their business even though they do not understand what they are filling out and signing. It is very important to make certain that the Formation, Organizational and Operational documents are prepared on an accurate and timely basis. Without this careful Business Structure and compliance with the formalities of Business Structuring, your business entity can be attacked in the future and the courts or the IRS can disregard the entity and allow personal liability as if no separate business structure ever existed.

In addition to Formation, Organizational and Operational formalities, securities issues and compliance are essential to keep you from running afoul of the State and Federal Securities laws. This is a very complicated area of the law which is often ignored or misunderstood by small business owners who don't think the securities laws apply to them. In every business that raises funds from others or plans to expand by seeking private or public funding, consideration of the securities laws from the start with pre-determined structuring based on the securities laws and various exemptions from them, will save a lot of time and trouble down the road.

Tax Planning is most often considered when it is too late to do any preventative planning. It is very difficult or impossible to do retroactive tax planning, so prudent business structuring includes strategic tax planning done well in advance of the time the tax returns will be due. Creative and timely tax planning can save tremendous amounts of money in the appropriate business structure for your business.

Business Entities

Every business owner needs help you making the decisions about what business entity you need to form to best serve your needs. LLC's are the most commonly used business entity because they are flexible in how they are treated for tax purposes. You can elect to treat an LLC like a corporation for tax purposes or, if more beneficial to you, like a partnership for tax purposes. If you are a single member LLC, you don't even have to file a tax return as the IRS will treat a single member LLC as a disregarded entity. A recent development with LLC's is the allowance of series LLC's in Texas. Series LLC's allow for multiple entities within one LLC without filing any new forms with the Secretary of State and without paying any additional filing fees to the State. Each Series can have different owners, management and operating agreements and insulated from liability from each other as if they were separate LLC's. Series LLC's are a great new planning tool to utilize in business, investment, and asset protection situations.

In addition to LLC's, some situations may call for a Corporation, which can be a C Corporation, or an S Corporation, depending on the desired tax treatment. If the owner of the corporation desires to let tax losses flow through in the early years of a business, but shift to normal corporate taxation later, electing for Sub S treatment as an S Corporation in the early is a good option. A C Corporation can be used as a vehicle to hold earnings at a low tax rate where dividends will not result in double taxation to the recipient.

Although not used as much these days, some situation still require partnerships as a business entity. Partnerships may be in the form of a General Partnership, a Joint Venture, or a Limited Partnership. In the General Partnership and Joint Venture, all the parties are liable. In the Limited Partnership, on the General Partner has unlimited liability, but the Limited Partners have no liability beyond their investment in the Limited Partnership.

Whatever Business entity you need, John can help you determine which is best for you and then set it up quickly and specifically for your situation.

Video - The Series LLC

The Series LLC

Most people have heard of an LLC or Limited Liability Company and the LLC is widely used as the business entity of choice in Texas for business operations or holding real estate or other investments.  The LLC combines the best qualities of a corporation and a partnership in one entity that protects from liability and provides significant tax benefits as well.  Although most people know about LLCs, few have heard of the new version know as the Series LLC.

Following the lead of progressive states like Delaware and Nevada, last year Texas became the eighth state to allow what is called a Series LLC.  In September of 2009, the Texas legislature amended Title 3 Chapter 1 of the Texas Business Code to provide for Texas LLCs which can have a series of sub-entities that are part of the original LLC, but have the characteristics of individual LLCs such as different ownership, different management and limited liability.  This progressive legislation keeps Texas at the forefront of desirable jurisdictions for business operations and confirms its place a as premier business location.

To understand the advantage of a Series LLC, consider the following example – A real estate developer or investor owns multiple projects or properties, A, B, C & D.  Prior to the Series LLC, in order to insulate Property A from the Liabilities of the other properties or vice versa, it would be necessary to set up four LLCs and incur the expense of set up and maintenance for each one.  It would also be necessary to have separate LLC’s if the developer or investor wanted to have different partners or investors in each of the properties

Now, with the Series LLC, it is no longer necessary to go to the expense and trouble of setting up separate LLCs for each property or to allow for separate investors.  With one Series LLC, separate properties can be held in different Series, i.e., Series A, B, C, & D of the LLC and they are insulated from the liabilities of each other.  If there is an accident at  property A and litigation is filed against that property, the other three properties are protected from claims against property A.  Each Series can also have different ownership and different management, if desired, and the LLC can have one Tax ID # and file one tax return.  When new projects are added later, a new Series is added to the LLC with no additional filing fees to the state and no new entity fees.  Although the Series LLC can file one tax return if desired, it is also possible to obtain separate Tax IDs for each of the Series and to file separate returns if that is preferable.

There is no doubt the Series LLC will enjoy great favor as a business entity in Texas for these reasons and many more.