10 Reasons Your Texas Cottage Food Business needs an LLC

Posted by Damian Roberti on July 1, 2023

Limited Liability: As with any LLC, this legal structure protects the owners' personal assets from being used to satisfy the debts or liabilities of the cottage food business. This is especially important if you encounter legal issues.

Professional Image: An LLC can enhance the professionalism of your business. It shows you are serious about your cottage food business, which can build trust with customers and partners.
Flexible Profit Distribution: LLCs in Texas, like those in other states, offer flexible profit distribution. Profits can be distributed in different ways, not just based on the percentage of ownership, which could be advantageous in certain circumstances, 10 Reasons Your Texas Cottage Food Business needs an LLC
Ease of Transfer: Ownership in an LLC can be easier to transfer than ownership in a sole proprietorship or partnership. This can be particularly beneficial if you intend to sell the business or bring in new partners in the future.

Business Continuity: Unlike a sole proprietorship, an LLC can continue to exist even if the owner dies or leaves the business. This ensures the longevity of the business.
No Franchise Tax for Small Revenue: For many small businesses in Texas, the state's franchise tax, often called a "margin tax," doesn't apply if the revenue is under a certain threshold.
Easier to Raise Capital: An LLC structure can make it easier to raise capital compared to a sole proprietorship. Investors generally feel more comfortable investing in a legally established business entity.

Privacy: By forming an LLC, you can keep your personal information separate from your business information, offering you a degree of privacy.

Flexible Management Structure: Texas allows LLCs to be either member-managed or manager-managed, providing the flexibility to operate your business in the way that best fits your needs.
Pass-Through Taxation: Like all LLCs, a Texas LLC enjoys pass-through taxation, meaning the business's profits are only taxed once, on the individual owners' tax returns, avoiding the double taxation faced by corporations.