Does anyone have an easy source they use for setting up an LLC for a side business?

State drives the requirements. You can do it yourself for about $400-500 or pay an attorney to do it for around double that.

Start here to get the basics: https://www.legalzoom.com/articles/how-to-start-an-llc-in-7-steps

You don't have to use legalzoom to do it. I read through their site and then set it up myself.

Thank you

are you a sole proprietor? make sure you set it up as a single owner LLC

There are several different options out there. (I am an attorney), so admittedly I would advise that you consult with a local one, and yes, it's more expensive, but it's worth it imo just based on things I deal with everyday when individuals try and alter forms and such.

With that said, it all depends on what you're setting up the LLC for and what you plan to do with it. Sites such as Legal Zoom and the likes do auto populate forms and are cheaper, but they're the general forms and they can't provide legal advice to you if you need more information.

In TX, SOS filing fee is $300. So you'll start with that. If you're outside TX, consult with your State's SOS office for fees.

I started with an LLC years ago because my attorney advised me to do so. His primary reason was that LLC weren't subject to Texas Franchise tax at the time.

Then Texas change the law so that LLCs were subject to Franchise tax

Then years later he convinced me to change to a Limited Partnership, which was a mistake mainly because of the additional record keeping that would be unnecessary with an LLC.

If you are a sole proprietor, I can't think of any reason why you shouldn't set up a single owner LLC.

My main reason for setting up anything was that I deal with large integrated oil and gas companies and they arent going to do business with Joe sole proprietor, but they would with an LP or LLC.

I don't sense either offers me much protection, so of course general liability insurance does some of that and I had to take out en errors and ommissions policy for a large system implementation project.

I agree. LLC's offer a lot of protection, both in regards to tax and liability.

Sole proprietors should always set up an LLC, and it borders malpractice if someone advises an individual to set up a SP instead of an LLC. Because of their benefits they are the most common used mechanism, but again, it always boils down to the people involved and what purpose they're trying to achieve

Texas veterans are eligible for a fee waiver and franchise tax abatement if that applies to you.

This is huge. Thanks for the heads up. I've been planning to start an LLC for a future business and wasn't aware of this waiver.

Edit: meant to give the thumbs up emoji. Sorry…

Thank you all for the advice

Did all of mine myself through the TX SOS website. Super easy and my accountant hasn't complained about it so I must've done it right

https://www.tvc.texas.gov/entrepreneurs/entrepreneur-resources/

TexAg1822 said:

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I agree. LLC's offer a lot of protection, both in regards to tax and liability.

Sole proprietors should always set up an LLC, and it borders malpractice if someone advises an individual to set up a SP instead of an LLC. Because of their benefits they are the most common used mechanism, but again, it always boils down to the people involved and what purpose they're trying to achieve

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In what way with regards to tax?

There's numerous benefits (better a CPA could explain) but it just largely gives you tax flexibility

A single member LLC won't provide you any tax benefits over a sole proprietorship. In fact, it's considered a disregarded entity for tax purposes, meaning it doesn't exist in the eyes of the IRS. This doesn't mean you shouldn't set one up for limited liability purposes, though. You can elect to have your LLC taxed as an S-Corp or C-Corp, but each of those come with additional filing requirements such as filing a separate return for the business, filing payroll tax returns, etc.

ETA: I am a CPA, but this is not tax advice for your specific situation.

Also a CPA and was wondering what tax benefits a single member LLC bestowed upon the member. Like you said, there are none. It is strictly there for legal liability reasons.

txaggieacct85 said:

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I started with an LLC years ago because my attorney advised me to do so. His primary reason was that LLC weren't subject to Texas Franchise tax at the time.

Then Texas change the law so that LLCs were subject to Franchise tax

Then years later he convinced me to change to a Limited Partnership, which was a mistake mainly because of the additional record keeping that would be unnecessary with an LLC.

If you are a sole proprietor, I can't think of any reason why you shouldn't set up a single owner LLC.

My main reason for setting up anything was that I deal with large integrated oil and gas companies and they arent going to do business with Joe sole proprietor, but they would with an LP or LLC.

I don't sense either offers me much protection, so of course general liability insurance does some of that and I had to take out en errors and ommissions policy for a large system implementation project.

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All the LLC is required to do is file franchise tax. Whether you pay is entirely based on financial performance meaning if you're under the no tax due threshold of about $1.3m then you file and don't owe anything. I'm hard pressed to see the justification for being over $1.3m as an SP. The legal protection afforded with the LLC structure is more than enough to offset the cost of compliance there.

I haven't read this whole thread closely so it may have been covered, but y'all should be aware that single-member LLCs may not grant you all of the liability protections you anticipate, particularly if you are the only employee.

While LLCs are very flexible business forms that have a lot of advantages, it can be a lot easier for a single member LLC to run afoul the law and forfeit those liability protections, often without even realizing.

Sole proprietorships remain a valid way to run a business. Personally, I probably wouldn't bother forming an LLC until my business had grown to a certain point or I was seeking to attract investors.

As far as the franchise tax is concerned, most "side hustle" businesses won't have enough income to qualify for it. You just have to fill out the "no tax due" form every year until you exceed that threshold.

This is not legal advice, just a discussion of general things you may want to discuss when you consult with an attorney.

Kampfers said:

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I haven't read this whole thread closely so it may have been covered, but y'all should be aware that single-member LLCs may not grant you all of the liability protections you anticipate, particularly if you are the only employee.

While LLCs are very flexible business forms that have a lot of advantages, it can be a lot easier for a single member LLC to run afoul the law and forfeit those liability protections, often without even realizing.

Sole proprietorships remain a valid way to run a business. Personally, I probably wouldn't bother forming an LLC until my business had grown to a certain point or I was seeking to attract investors.

As far as the franchise tax is concerned, most "side hustle" businesses won't have enough income to qualify for it. You just have to fill out the "no tax due" form every year until you exceed that threshold.

This is not legal advice, just a discussion of general things you may want to discuss when you consult with an attorney.

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You should not be an employee of your single member LLC unless you have elected to be treated as a corporation.

As to the bolded, what is your threshold, at what point? And the seeking investors, how does that prompt you to become a single-member LLC?

TexAg1822 said:

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Sole proprietors should always set up an LLC, and it borders malpractice if someone advises an individual to set up a SP instead of an LLC.

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This just simply isn't true. It entirely depends on who is running the business, how they are running it, and what their goals are. For a lot of "small business owners", the legal costs of forming an LLC are not worth the benefits it affords. This is mainly true for single member/single employee businesses with limited incomes - but there are a lot of people out there like that.

one safe place said:

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Kampfers said:

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I haven't read this whole thread closely so it may have been covered, but y'all should be aware that single-member LLCs may not grant you all of the liability protections you anticipate, particularly if you are the only employee.

While LLCs are very flexible business forms that have a lot of advantages, it can be a lot easier for a single member LLC to run afoul the law and forfeit those liability protections, often without even realizing.

Sole proprietorships remain a valid way to run a business. Personally, I probably wouldn't bother forming an LLC until my business had grown to a certain point or I was seeking to attract investors.

As far as the franchise tax is concerned, most "side hustle" businesses won't have enough income to qualify for it. You just have to fill out the "no tax due" form every year until you exceed that threshold.

This is not legal advice, just a discussion of general things you may want to discuss when you consult with an attorney.

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You should not be an employee of your single member LLC.

As to the bolded, what is your threshold, at what point? And the seeking investors, how does that prompt you to become a single-member LLC?

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People are coming on TexAgs in lieu of seeking actual legal advice. I doubt they know that. People act as employees of their own single member LLCs all the time. I agree, you shouldn't. But it happens. Because you get people who say everything should be an LLC, they read that online, form one using legal zoom, and then continue operating it as they did their sole proprietorship.

Really I guess my point is to consult with an attorney. If it's a small enough business you should qualify for some local pro bono/entrepreneurship clinics that won't charge you a consultation fee and who can provide advice specific to your situation.

As to the investor point, it's just because investors prefer to have the business set up as an LLC with fully transferable shares or a C-Corp (this is actually the most preferable form for investors).

I think we just have a difference in opinion, because I see what you're saying. Obviously each person and their situation is different.

In my experience though, it is always worth paying a little more upfront to form an LLC and be afforded a layer of protection because the cost(s) that could result from simply running a business as a SP could heavily outweigh spending a little more upfront to form the LLC. So I am of the opinion that it is a better route, and that was what I was more comfortable with setting up with when I was creating my personal entity.

Also, have to start paying unemployment insurance if I'm not mistaken.


Not exactly sure what the thresholds are on that though.

TexAg1822 said:

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I think we just have a difference in opinion, because I see what you're saying. Obviously each person and their situation is different.

In my experience though, it is always worth paying a little more upfront to form an LLC and be afforded a layer of protection because the cost(s) that could result from simply running a business as a SP could heavily outweigh spending a little more upfront to form the LLC. So I am of the opinion that it is a better route, and that was what I was more comfortable with setting up with when I was creating my personal entity.

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Yeah my responses are probably biased some because I spent some time working with a community development clinic and we often had people come to us about forming LLCs. Sometimes we helped them form them, but a lot of times those businesses had much more pressing legal concerns that required our attention instead (the owners were often unaware of those concerns coming in).

Granted, those were often VERY small businesses and the owners did not have the financial means that many posters on this board do. And a lot of them were the only employee.

I don't disagree with your general points I just thought that the statement re: malpractice was quite extreme.