 Posted - 10/15/2017 : 13:29:14
Jezze, I'm not an attorney so please verify everything that's said below.
The main reason that a sole proprietor establishes an LLC with their states's secretary of state is usually to limit your liability - so that you don't risk losing your home, car, etc., should somebody sue the company. This is generally a very good idea. We've done everything we can to make customers happy over the years, yet were threatened with a lawsuit by an enormous organization, in a vastly different market, with a history of taking action against smaller companies for unexpected reasons. We've heard plenty of stories about patent trolls going after smaller companies, too.
The IRS generally treats a sole proprietor's LLC the same as the individual taxpayer, so all profits flow directly to you on your federal tax forms. However, you can file additional paperwork with the IRS to change this - for example a form 2553 to be treated as an S Corporation. Sole proprietors sometimes convert to an S Corporation to reduce self-employment taxes, but this requires much more ongoing paperwork, including quarterly payroll tax payments to the IRS. Texas has no state income tax, and our attorney advised us that there's no need to file additional paperwork with our state to be treated an an S Corporation by the IRS.
Here in Texas an individual, LLC, or corporation can file an assumed name certificate with their local county clerk. Once you do this, you can call your company the assumed name (DBA) that's on the certificate. This is often used, say, if you have a website to promote one kind of product, and want to launch a website with a different URL to promote something else. An individual, LLC or corporation can all register as many assumed names as they need to to operate their businesses. An assumed name doesn't need to include the type of entity (LLC, Inc., Corp., or anything else) which is good since this could change over time.
Having an assumed name (DBA) doesn't change anything with respect to your legal status, liability, taxes, etc. It only makes it legal for your business to operate under one or more assumed names (DBAs) you choose.
If you're considering establishing an LLC or DBA, it's important to register the corresponding domain name with your web host before registering it at any government office, or even inquiring whether anyone else is using the name. That's because some government database queries are visible to unscrupulous third parties who may try to quickly grab the URL and hold it for ransom. We were fortunate that our desired LLC name was something long and unremarkable, because someone grabbed that domain name the instant we checked it at the county clerk's office. So we simply found another long, unremarkable name for our LLC, registered that domain name (which we use only for some vendor emails that don't involve customers), and then registered the LLC name with the state.
We knew to register our short, memorable web store domain name with our web host before checking it at any government office. Thank goodness.
I hope this helps.
Edited by - pauld on 10/15/2017 14:24:27
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LLC Question
