Texas Series LLC Is Nothing to Fear

Texas Series LLC Is Nothing to Fear

The LLC and S-Corp are the most common business forms for closely held businesses, such as medical and dental practices. Both provide the owners a degree of protection from liability and some tax advantages. The Series LLC does this one better: it allows a business owner to separate out different lines of business or types of assets within a single host LLC; a business owner can avoid the expense and time of managing multiple LLCs while protecting the assets of one business from the risks of another.

How it Works

If your business is a business corporation ("Inc."), has employees and shows net income before tax, it is an ideal candidate for an ESOP. The ESOP uses annual contributions the company makes as tax-free employee compensation to buy up to 100 percent of the owner's stock. Typically the ESOP buys 49%, leaving you 51%, a controlling share. You can sell that 51% at retirement. The ESOP can borrow from a bank, using the annual contributions as payment on the loan ("amortization"). This gives you cash up front when you need it. The best part: you don't pay tax when you take this money -- only when you spend it.

Uncertainty about taxes

Although the Series LLC has been around since 1996 (Delaware was the first state to establish this type of business entity), the IRS did not release any formal guidance until 2010, when Internal Revenue Bulletin 2010-45, REG-119921-09, “Notice of Proposed Rulemaking Series LLCs and Cell Companies” was published. (Read Article)

Find a Professional

Find out if the Texas Series LLC can protect your assets. Wilson Legal Group can convert your existing LLC or establish series anew.

About Walter Wilson
Walter Wilson brings an entrepreneur's view to the law. He helps clients insulate their assets, lower their tax bills, and sell their businesses for up to four times what they could get by merely listing them

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