Should I include my spouse as a owner of my LLC?

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What are the pros and cons to including my spouse as an owner of my new LLC? Since Texas is a community property state, won’t my spouse own 50% of my new LLC anyway?

You are essentially deciding between a single-member LLC and a multi-member LLC. Whether or not to include your spouse as a owner of your new LLC depends on his/her desired involvement. A single-member LLC (SMLLC) is much less complicated.

From a tax perspective, a SMLLC is considered a disregarded entity meaning the SMLLC’s profits are simply included on the owner’s tax return (federal tax return for the LLC is not required). A multi-member LLC is taxed like a partnership and thus a federal tax return (IRS Form 1065) is required. In Texas, an LLC that is owned by only a husband and wife, can elect to be taxed like a SMLLC. If for some reason partnership taxation is your desire, you can accomplish this by adding your spouse to your SMLLC.

From a liability perspective, a Texas LLC provides a liability barrier (between the business liabilities and owner’s assets) whether it is a single- or multi-member LLC.

From a management perspective, a multi-member LLC requires input from both owners. When the LLC takes an action, it should be documented that the owners authorized the action. With a multi-member LLC, the documentation becomes even more important. In addition to consent/authorizations, both members in a multi-member LLC are entitled to distributions of cash in the event a distribution is made.

Disclaimer: Do not take anything contained in this post to be legal advice about your specific situation. This post is not a substitute for legal advice.

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