Should My New Texas Business Be Formed as an “S” Corp or an LLC?

While deciding which business structure will best serve your needs, always consider several key factors. For example, look at how many employees you plan on hiring and how much time you want to spend managing the company. You should also make sure you’re fully protecting your personal assets against future lawsuits and not incurring any excess taxes.

One excellent way to choose the best structure for your company is to meet with your Houston business law attorney. The two of you can discuss all that you might gain (or lose) by starting your company as either an LLC (limited liability company) or an “S” corporation.

Before noting some of the basic steps involved with forming an LLC and an “S” corporation, here’s a brief overview of the unique offerings and drawbacks of both structures.

What are some chief advantages and drawbacks of starting an LLC?

Depending on the size of your business and the types of goods or services you’re selling, you may prefer an LLC for the following reasons.

  • It offers a less formal structure. An “LLC” is also often easier to manage than an “S” corporation, especially when you have few employees. And you’ll never need to have any board meetings to tackle problems tied to issuing stock certificates;
  • You can readily change this business structure (once all proper paperwork is filed). If

you’re running an “S’ corporation, you’ll first have to arrange a formal board meeting before trying to change the business structure);

  • All members of an “LLC” do not have to be permanent residents or U. S. citizens;
  • You can more easily divide up who handles most of the daily work – while allowing others to just be investors. You can also simply divide up the profits based on each person’s initial investment and daily work contributions;
  • Disadvantages of an “LLC” compared to an “S” corporation. These can include having all the company profits subjected to self-employment taxes. Your growth may be limited since your business cannot issue any stock shares. Always ask your Houston business law attorney about any other potential disadvantages that may apply to your unique situation.

Why do some entrepreneurs prefer forming “S” corporations – despite the limitations?

  • Formality is viewed more favorably by some. Outside businesses often prefer interacting with companies that employ a more formal corporate structure;
  • You can often use this structure to avoid double taxation of income;
  • Profits are passed on to the shareholders (by way of their paid dividends). Therefore, the company does not have to pay taxes on those profits;
  • Possible drawbacks. All shareholders must be permanent residents or U.S. citizens. There can be no more than 100 shareholders. Added state filing fees may apply. Also, the IRS

tends to monitor “S” corporations very closely since some people try to improperly avoid certain taxes by wrongfully using this business structure.

What are some basic issues that must be addressed while forming an “LLC” in Texas?

  • Membership. You’ll need to decide how many owners or members you’ll have and if they’ll share all the managerial duties;
  • Naming your business. You must choose a unique name to avoid confusion with already existing companies;
  • File all required forms. You’ll need to start with a certificate of formation (Form 205) that must be filed with the Texas Secretary of State’s Office;
  • Registered agent. You must name a registered agent who can accept the service of process on behalf of your company;
  • You’ll need to create an operating agreement. It’s usually best to ask your Houston business law attorney to draft this document for you after you’ve

discussed the precise nature of your new business;

  • Fully satisfy all state and federal paperwork requirements;
  • Obtain all required state and local business licenses that may be required for your industry.

(Note: Some of these same steps may also be required while forming an “S” corporation below, regardless of whether they’re listed).

Here’s a brief review of key issues involved in starting an “S” corporation in Texas

  • The drafting of Articles of Incorporation. These must be filed with the Texas Secretary of State’s Office;
  • Stock certificates must be issued to all initial shareholders;
  • All applicable business licenses and certificates must be obtained in a timely manner;
  • You’ll need to file Form 2553 with the Internal Revenue Service. (Your lawyer can first check to be sure you meet all the qualifying terms for creating an “S” corporation).

Please feel free to contact one of our Murray Lobb lawyers so we can answer your questions about each of these business structures. We can also help you draft all the documents you’ll need to transact business throughout the year.

Q & A: Job Accomodations Often Requested by Disabled Workers

Like most Americans, people living with chronic disabilities know that their best physical and mental health is often easiest to maintain when they’re doing meaningful work. Yet despite their strong work ethic – many of the disabled must still combat negative stereotypes that often don’t match the excellent work they do.

Fortunately, the Americans with Disabilities Act of 1990 (ADA) made it illegal for employers to discriminate against job applicants with known disabilities. The ADA applies to all employers with 15 or more employees and to all state and local government employers. The Equal Employment Opportunity Commission (EEOC) enforces all the provisions of the ADA.

Once employers become aware of the untapped talents and skills of the disabled, they still hesitate to hire people because they’re concerned about the “reasonable accommodations” they may need to make to help disabled workers function at their full capacity. However, most of the time, the special requests made by the disabled are relatively simple to handle.

Here’s a brief look at some of the questions employers often ask about properly honoring all the ADA’s provisions in the workplace.

Frequently asked questions concerning the Americans with Disabilities Act

Q:  What exactly constitutes a “disability” under this law?

A:  A job applicant’s disability is normally covered by the ADA if it involves a mental or physical impairment that substantially interferes with (or limits) an individual’s ability to handle a major activity like work.

Q:  Can my company require a job applicant to undergo a medical exam before extending a job offer?

A:  Generally, no. However, you can make a job offer that’s conditional, based on a satisfactory result of a post-offer medical exam (or inquiry) that’s required of all new employees entering in the same job category. Under certain circumstances, always best discussed in advance with your Houston employment law attorney, you can ask an applicant who has disclosed that s/he has a disability to either demonstrate the ability to perform the job’s required tasks – or at least describe how s/he will handle them due to the disability.

Q:  What constitutes a “reasonable accommodation?”

A:   Employers sometimes need to adjust or modify certain aspects of the job application process and how a job is performed so that a disabled person can readily enjoy the same rights and privileges extended to others without disabilities.

Q:  Do we have to grant preference to a disabled applicant over someone who is not disabled?

A:  No. One of the clearest examples provided by one source refers to a job where the employees may need to type rather fast. If the disabled job applicant’s best typing score (after being provided with appropriate testing accommodations) is only 50 wpm and a non-disabled applicant can type 75 wpm, the employer is completely free to hire the faster typist. Again, this holds true if fast typing skills are crucial to the job;

Q:  Can you provide concrete examples of reasonable accommodations that employers might need to provide?

A:  Yes. A sample list follows.

  1. You may need to modify how someone takes a qualifying exam, completes a training program or handles limited aspects of the job once hired. For example, a person with limited use of his hands may require special software that lets him dictate most of his work instead of typing it;
  2. You may have to honor certain lifting limitations or a requirement that someone remain seated in a regular chair most of the day. Depending on the disabled person’s special needs, particularly if she’s suffering from a spinal cord injury, you may need to provide an ergonomically correct chair. Of course, employers can object to some requests, if they can prove that purchasing the required equipment would likely impose an undue hardship on them;
  3. It may be necessary to allow a disabled person to work from home. Some disabled people need to work in either extremely high- or low-light environments. Others may need to telecommute so they can readily take certain medications — or periodically change, adjust or empty various medical devices they must wear. Still other employees may need to lie down and periodically rest their bodies due to various spinal cord or traumatic brain injuries that make sitting upright for lengthy periods of time too compromising or painful.

Please note that regardless of whether the disabled employee works at home or in a company’s office, no employer is required to lower their standards for the quality of work being done – nor lower their overall production standards;

  1. It may help to change an employee’s work schedule. This can help the disabled person perform the required tasks at a time of day or night that may be much more conducive for doing his/her best work;
  2. You may need to make special scheduling adjustments to help an employee with a known psychiatric or mental health impairment. This might include excusing the person from working rotating shifts; allowing the individual to take extra time to rest during the lunch hour — and making sure the employee has a work schedule that allows for regular therapy appointments during the day;
  3. It may be necessary to provide a TTY (text telephone) system to a worker who has suffered a significant hearing loss that’s been formally recognized as a disability;
  4. You may need to authorize a short-term leave from the job. This type of disability request will always revolve around special circumstances. For example, if a worker and his/her doctor both believe that such a leave is necessary to help improve the person’s health and ability to work, this might be useful. However, employers are not required to bear undue hardships and disrupt overall workflow by leaving critical positions unfilled for lengthy periods of time.

As all this material indicates, meeting ADA standards is usually a straightforward process. Odds are, you’ll soon discover that hiring disabled employees is a smart move since they’re normally highly qualified and eager to succeed.

Please feel free to contact one of our Murray Lobb attorneys so we can assist you as you try to conform with all the ADA’s provisions – while also creating a pleasant job atmosphere for all your employees.