There are many different business structures to choose from for any business owner like corporation, Texas LLC, sole proprietorship and partnerships. Every type of entity like the Texas LLC has its own benefits and drawbacks. When it comes to Texas LLC the biggest advantage you gain is the tax flexibility. When you form a Texas LLC, you can either choose to file as a corporation or a partnership or a sole proprietorship as per your convenience. And your taxation will depend on whether you choose Texas LLC or some other form of corporation.
Now let us look at what you need to do if you want to file taxes for your Texas LLC as a corporation.
Submit petition to IRS
The first step in filing taxes for your Texas LLC is to submit a petition to the IRS. The petition on your Texas LLC should clearly state that you choose to be taxed as a corporation. IRS will approve your petition post which you can start filing taxes as a corporation for your Texas LLC. You can continue to get your Texas LLC taxed as corporation every year until you want to change it. To change your Texas LLC to be treated as another entity, you have to submit a petition to IRS again on behalf of your Texas LLC. While the petition might be a simple form submission, an expert tax advisor can help create it for your Texas LLC with ease.
What you need to remember is to however not keep changing the status of your Texas LLC as IRS may not always approve frequent entity change. And if IRS gets a suspicion that you are changing the status of Texas LLC for getting a better tax rate, then your requests will be denied. A legal or tax expert can help forming a Texas LLC or in conversion or managing of your taxes on Texas LLC.
More on tax flexibility
While Texas LLC will help you to gain a better ground on taxation, there are certain limitations too. If your Texas LLC was a corporation before it was changed to an LLC, then there will be corporate taxes which you will be liable to pay. There have been instances of corporations changing to Texas LLC for getting tax benefits and therefore the government has stopped the conversion of Texas LLC to corporations now. But you can definitely have your Texas LLC (changed from a corporation) taxed as C-corp or as S-corp. This decision has to be made based on your business demands and requirements of your Texas LLC.
Choosing on forming a Texas LLC is your first step to starting your business. The decision to make a Texas LLC has to be based on multiple factors in reference to your business. But if you are planning to form a Texas LLC for the tax benefits or change your existing business entity to Texas LLC on the same grounds, then it would be prudent to consult an expert in the area before making a decision.