Thanks for your question! Texas and Delaware have separate tax frameworks so this response will provide general details on tax liabilities for limited liability corporations and then analyze each state’s tax structure separately.
Limited Liability Corporations (LLCs) are not taxed on their profits directly. Instead, profits “pass through” the business and the LLCs members report the profits on their personal federal and state tax returns (if the state has a personal income tax). Assuming your business is not automatically classified as a corporation for tax purposes (it is important to note that corporations are not LLCs), the IRS will either treat your firm as a sole proprietorship if your LLC has one owner or a partnership if the LLC has more than one owner. If your LLC is a sole proprietorship, you will report its profits or losses on your personal income tax return. If your LLC is a partnership, you and your partners will report its profits or losses in proportion to your ownership shares in the firm.
Delaware LLCs are classified as partnerships for state income tax purposes and must pay a minimum $ 50 franchise tax (which may be higher depending on whether your company has stock), a registered agent tax, and hire out an agent to receive legal documents and notices directed to the company. There is no sales tax on goods or services. And you will not pay state business income tax unless your firm does business in Delaware. Also, you will be forced to pay the state more if your firm plans on distributing stock to shareholders. If you are planning on distributing stock, it is in your best interest to set the par value as low as possible. The minimum filing fee is $89. If you want expedited filing, though, the following options are available:
· One-hour filing fee is $1,000.
· Two-hour filing fee is $500.
· Same-day filing fee is $100.
· 24-hour filing fee is $50.
If you provide more information, I can advise you on special taxes that you may have to pay should you form an LLC within the state.
On the other hand, limited liability corporations registered in Texas generally only have to pay franchise, property, and sales taxes. To form a corporation in Texas, you will have to pay a $300 filing fee and a 1% annual franchise tax if the firm’s income is over $150,000.
Texas does not have a personal income tax. Texas does, however, impose special taxes on firms operating in certain sectors. Here is an organized list that should help you assess whether your tax liability in the state would be too onerous:
Speaking broadly, Texas imposes special taxes on businesses serving the automotive industry, oil companies, entertainment and hospitality businesses, and financial institutions, public utility companies, and insurance firms.
If there is something that this response did not cover that you would like answered, please message me or direct another question to my attention. I hope this helps.
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