What Is an LLC in Texas?

A Limited Liability Company (LLC) is a popular choice for Houston small businesses due to its flexible compliance requirements and strong liability protection. On the tax side, LLCs offer pass-through taxation by default, with the option to elect S-Corp taxation later if it becomes more advantageous.

Key Benefits of an LLC

• Pass-through taxation – profits are reported on the owner’s personal tax return.
• Limited liability – protects personal assets from business debts.
• Simple setup and maintenance with the Texas Secretary of State.
• Ability to convert to S-Corp taxation when profits grow.

What Is an S-Corp?

An S-Corporation (S-Corp) is not a separate business entity, it is a tax classification elected with the IRS. S-Corps are favored for their ability to reduce self-employment taxes by splitting income between a salary and distributions.

S-Corp Advantages

• Avoids double taxation.
• Lower self-employment tax through salary/distribution split.
• Pass-through taxation with enhanced tax planning opportunities.

LLC vs S-Corp in Houston Texas – Key Differences

Which Structure Saves More on Taxes in Texas?

For many small business owners earning over $60,000 annually, the LLC vs S-Corp in Houston Texas comparison often favors the S-Corp due to potential self-employment tax savings, along with other deductions.

• Self-employment tax reduction
• Business expense deductions
• Health insurance write-offs for owners
• Retirement plan contributions (SEP IRA, Solo 401k)

Learn more at: IRS S-Corporations • Texas Franchise Tax