Texas Business Attorney

Texas LLC's and Taxes - Things You Need to Know

If you're considering starting a business or you've already started one and decided that structuring your business as a Limited Liability Company, or LLC, then you already understand the advantages that such a structure provides. The advantages are numerous in nature, and most importantly, you'll generally be shielded from liability if something unexpected happens, which means that you won't have to face the possibility of losing your personal assets.

However, there is another issue to consider in regards to an LLC in Texas besides liability, and that issue is taxes. An LLC carries tax implications both on the personal and the business fronts, and there are also fees and schedules that you need to keep in mind if your LLC in Texas is going to continue to operate smoothly. Below are a few of those particularities.

Personal Income Taxes

When you own an LLC, you generally get to avoid being "double-taxed" in terms of the revenue and income that the business generates. An LLC operates much like a proprietorship in regards to the tax code, in that the revenue that your business generates in effect "passes through" the entity and into your own personal income statements. There are limited schedules that you'll have to file with your tax return, but most of the time, you'll be able to treat your tax return and the income you generate from your business as if you were an independent contractor operating for another business altogether.

Schedules and Fees

One of the many advantages to living and working in Texas is that you get to avoid the encumbrance of paying personal income taxes to the state. Given that the LLC operates as described above, you basically won't have to worry about paying state income taxes from year to year. However, there are certain fees and schedules that you will have to pay to maintain the right to operate your LLC in Texas, and not paying these fees or filing these schedules in a timely manner can create a seriously harmful situation for the long-term viability of your business.

The biggest fee to remember is the franchise tax in Texas. This tax is basically is set at 0.25% of the net taxable capital, plus 4.5 of the net taxable surplus. That is about to change however, and after January 1st of 2008, that percentage will rise to 1%. There are thresholds in place, however, but those can change.

Overall, you do have tax issues to keep in mind as you operate your LLC in Texas. If you'd like to gain a full understanding of these issues, contact a business lawyer at Slater & Kennon immediately to schedule a consultation.


Centrally located in the Arboretum area of north Austin, the Slater & Kennon law firm represents clients in Travis County, Bastrop County, Burnet County, Williamson County, and Hays County, including the cities of Austin, San Marcos, Bastrop, Burnet, and Georgetown.