Tax Issues with an LLC in Texas
If you're forming an LLC in Texas, you obviously have a lot to think about in regards to your new business. If you're simply changing the structure of a business that's ready to take the next step in its growth, there's more to think about than simply completing a few forms and adding the "LLC" label to your letterhead and business cards. One of those central issues is the question of taxes and tax liability in general, and that is explained briefly below. In the meantime, if you have questions regarding the formation of an LLC in Texas, contact the professionals at Texas Legal Entities today to obtain all the information you need to get started properly.
LLC's and Federal Tax Liability
Federal tax liability deals with the amount of money you need to send to the US Treasury, and these tax revenues are collected and managed by the Internal Revenue Service. The IRS, obviously, is a federal agency, which means that you will fall under the same tax brackets and face the same tax liability regardless of where you form your LLC.
Specifically, the federal government treats LLC's with only one owner as a general proprietorship for tax purposes, which generally means that most LLC's will not have to file a federal tax return, as you will be taxed individually on the profits generated. If the LLC has more than one owner, the IRS generally treats that entity as a general partnership, and the tax liability generally works the same as if there was only one owner. The one difference to keep in mind, however, occurs when the LLC keeps a substantial amount of profits in the company's name and holdings, which could require an additional set of forms on the tax return.
LLC's and Texas Taxation
Generally speaking, Texas does not collect individual income taxes, but that issue is somewhat muddied when someone owns and operates an LLC, as the state does require taxes to be paid in one form or another for businesses. These tax liabilities are varied in nature, and can be quite confusing depending on the specifics of your ownership, how much of the revenue is paid to the owners, what constitutes profit and other questions.
Overall, taxation is an issue not to be taken lightly or put off until the following April. In order to stay ahead of this game, you need to contact the professionals at Texas Legal Entities to properly prepare for the next tax year.
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