Welcome to the Kazi Law Firm! We are a boutique law firm steeped in Texas tradition personifying the warmth and congeniality consistent with southern hospitality. We believe in preserving integrity and professionalism with true Texan charm, staying true to our roots, while providing essential, affordable legal services to all. Located just north of Dallas, Texas in the rapidly growing suburb of Frisco; the Kazi Law Firm concentrates on contracts drafting and review, wills & estate planning, real estate law, landlord, tenant, mediation, and general business law needs.
If I had a dollar for every time a client asked me why they needed an LLC for their new business venture, I would be retired and lounging on the beach somewhere in the middle of the Pacific. An LLC (Limited Liability Company) is the business entity of choice and truly beneficial for 99.99% of organizations. Think of an LLC as the greatest gift ever given to businesses by the state legislature.
Let’s talk more about this incredibly useful entity formation in greater detail. Forming an LLC gives your business its own legal identity. In the eyes of the law, it’s a separate “person” that can own money and property, have a bank account, make agreements, sue people, and be sued. Due to this separate “identity,” your business’s creditors can’t go after any money or assets that aren’t owned by the LLC. Your home, personal bank accounts, and other personal assets are protected. Therefore, an LLC insulates you from creditors and keeps your personal assets apart from your business assets.
For example, say that you own a landscaping business and accidentally hurt the homeowner with a piece of equipment. The homeowner can sue the business and possibly recover from the business’ assets. However, he cannot touch your personal assets in the lawsuit due to the landscaping business’ entity status as an LLC.
However, keep in mind that there are limits to an LLC’s liability protection. You will still be personally liable if someone sues you for your own negligence or wrongdoing, even if the accusations are related to your business. An LLC does not protect your assets if you personally guarantee a contract or loan. Also, it won’t protect the business itself from losing everything in a fire, flood, lawsuit, economic downturn, or global pandemic such as Covid-19.
Another advantage of an LLC is the taxation options. Most LLCs are taxed as a sole proprietorship or partnership, but LLCs can also choose S corporation or C corporation taxation. Can you imagine that? Your business entity is allowed to tell the IRS how to treat it with regards to taxes.
For example, if your LLC has only one member (you are the only owner), it defaults to a “disregarded entity” for IRS purposes, meaning the IRS does not see your LLC and you simply file a Schedule C. If your LLC has more than one member, it defaults to a partnership for IRS purposes. Neither of these entities pay any taxes, they “flow through” profit/loss to you the owner(s). Thus, the LLC default is a “pass through” tax, which is incredibly beneficial to a small business owner.
Additional Benefits of an LLC
Your business is most likely to benefit from being an LLC if either of these is true:
- Your business has significant risks, and you want to protect your other personal or business assets. Some types of businesses are at a high risk for failure. Others have both financial and liability risks. For example, multiple LLCs are a common strategy for rental property owners to ensure that financial problems with one rental don’t jeopardize the others, or your own life savings. Another optimal solution is to create a Texas Series LLC. To learn more about this relatively new entity, read our post here.
- You have co-owners or employees. Without an LLC or other business entity, your personal assets are at risk if your business is sued for something a co-owner or employee does. An LLC’s operating structure also helps to avoid conflict and misunderstandings between you and your business partners.
Further, an LLC is an attractive option due to it flexible membership capabilities. Members can be individuals, partnerships, trusts, or corporations, and there is no limit on the number of members. S corporations (which is a corporation that has elected to be taxed as a pass-through entity under Subchapter S of the Internal Revenue Code) are much more restricted in who can be a shareholder, and there is a maximum limit on the number.
Additionally, there are limited compliance requirements for an LLC as opposed to a corporation or partnership. LLCs face fewer state-imposed compliance requirements and ongoing formalities than sole proprietorships, general partnerships, or corporations (whether taxed as S corporations or C corporations). Similarly, there are few management requirements. Members can manage the LLC or elect a management group to do so. Corporations, on the other hand, are managed by a board of directors, not shareholders.
An LLC affords a new business owner a sense of heightened credibility. Starting an LLC may help a new business establish credibility more so than if the business is operated as a sole proprietorship or partnership.
If you need assistance in forming your LLC or have additional questions as to which corporate structure is right for your business, please don’t hesitate to contact your experienced Frisco business law attorneys at the Kazi Law Firm.
I built my law practice on the premise of being a life raft in a sea of sharks. I want to be an advocate for those that have been wronged and are too intimidated to seek help. My firm is here to explore your options, guide you through your legal journey, and give you that safe space to ask questions! There’s no such thing as a stupid question…Only the ones you don’t ask. So, my question to my clients is not “do you have any questions?” But rather “what questions do you have?”
As always, the Kazi Law Firm is standing by to help you in your time of need. Don’t hesitate to contact us today. We specialize in real estate law, landlord-tenant disputes, immigration, and wills & estate planning. Family is at the core of our practice. Just as we treat our family with respect and understanding, we treat yours. Come join the Kazi Law Firm family today!
Why swim alone in shark-infested waters when you don’t need to?
