Want to know about the difference between a corporation vs LLC in Texas (as well as sole proprietorship)? This table will hopefully make it clear.
|Sole Proprietorship||C Corp||S Corp||Limited Liability Company (LLC)|
|Formation Requirements & Costs||None||Must file with state, state specific filing fee required||Same as C Corp + file with IRS||Must file with state, state specific filing fee required|
|Personal Liability||Unlimited liability||Shareholders are not typically held liable for the acts of the company or its agents||Same as C Corp||Members are not typically held liable for the acts of the company or its agents|
|Administrative Requirements||Relatively Few Requirements||Election of board of directors/officers, annual meetings, and
annual report filing requirements
|Same as C Corp||Relatively Few Requirements|
|Management||Full Control||Shareholders elect directors who manage business activities||Same as C Corp||Members can set up structure as they choose|
|Term||Terminated when proprietor ceases doing business or upon death||Perpetual: can extend past death or withdrawal of shareholders||Same as C Corp||May be perpetual|
|Taxation||Entity not taxable.||Taxed at the corporate rate.||No tax at the entity level. Income passed
through to members.
|No tax at the entity level. Income passed
through to members.
|Double Taxation||No||Yes, taxed at corporate level and then again if distributed to
shareholders in the form of dividends
|Self-employment Tax||Subject to self employment tax||Salary subject to self employment tax||Salary subject to self employment tax, but shareholder distributions are not subject to employment tax||Salary subject to self employment tax|
|Pass Through Tax Treatment||Yes||No||Yes||Yes|
|Tax Forms||1040||1120||1120S + K-1 for shareholders||1040 or 1065 with K-1 for members|
|Transferability of Interest||Must sell business||Shares of stock are easily transferred (subject to securities laws)||Must observe IRS regulations on who can own stock||Possibly, depending on restrictions outlined in the operating agreement|
|Raising Capital||Individual provides capital.||Shares of stock are sold to raise capital (securities laws apply)||Shares of stock are sold with more restrictions than C Corp||May sell interests, but subject to operating agreement (securities laws may also apply).|
|Ease of Operation||Easiest||Must have annual meetings, Board of Directors meetings, corporate minutes, and stockholder meetings.||Same as C Corp||Easy|
|Registered Agent||Not Required||Registered Agent required||Registered Agent required||Registered Agent required|
Hopefully this table showing the difference between corporation vs LLC in Texas will help guide you in choosing which entity is right for you.
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