INDUSTRY CLASSIFICATION CODES: NAICS & SIC

By: Allen T. May, C.E.O. of Westwood Associates, LLC

During the industrialization of our Great Nation, entrepreneurs didn’t have the technology we have today for business analysis, data mining, or marketing. Some industries such as lumber, coal, and other fuels just did exceptionally well because those resources were in high demand. Imagine the entrepreneur selling lumber Kansas or Nebraska to the railroads or some of its passengers. It was a no-brainer for them. Their product was in high demand. This was a beautiful thing back in the day. Imagine the satisfied looks on industrial captains such as Firestone, Mellon, J.P. Morgan, and Rockefeller. They didn’t need marketing analysis. The just needed more products for the insatiable appetite of a booming nation.

Big Brother felt it their duty to keep track of all this. As industrialization gained momentum during the early 1900s, various departments of the U.S. government initiated research and studies on the various industries and their different functions. The aim was to consolidate information to come up with important decisions about necessary facilities, investments and regulations to further support the industrial growth. However, due to the lack of set standards, each department ended up using its own methodology. Consolidating information across multiple sources became a challenge. The Standard Industrial Classification (SIC) was hence proposed as uniform classification system, aimed to represent major industries, sub-class and specific function/product and was formally adopted in 1937.

> How do SIC Codes Work?
Depending upon the industry group, product or function, SIC codes were designed such that one single SIC code can apply to multiple firms and companies. For example, SIC code “0115” indicates multiple details and categorizations as follows:

a.) First 2-digits “01” indicates the major group (“Agriculture Production – Crops”)

b.) First 3-digits “011” indicates industry sub-group (“Cash Grains”) which includes wheat, rice, corn, etc.

c.) The entire 4-digit code “0115” indicates a specific product group (“corn”)

If any research related data is tagged with the above 4-digit code, it becomes easy to classify data at various levels. For example: What was the total production of all agricultural crops in 2016 in Kansas? Simply pull records matching the first 2-digits of SIC codes as “01” (or 4-digit SIC code = “0100”) and state = “Kansas” and year = “2106”.

In another example, how many businesses operate in “cash grains” segment (which includes wheat, corn, soybeans, etc.) in Canada? Simply pull records matching first three SIC code digits as “011” (or 4-digit SIC code = “0110” and county = Canada.

To know how many companies are registered in Texas producing corn, one simply needs to generate the report which has the 4-digit SIC code “0115”.

> Use and Benefits of SIC Codes:
The structural hierarchy of SIC codes starts with the broad industry type 2-digits, further narrowing to sub-industry 3-digits, and finally pointing to specific specialization 4-digits. Using the same SIC code “0115” for corn, two data gatherers, one surveying farms in the countryside about how much corn has been sown by farmers for the coming season, and another at the local market tracking the sale price of corn, supply and demand of current corn produce, were able to consolidate their data uniformly. Use of these standard SIC codes facilitated easy reporting, data analysis and decision making for future investments and other necessary support.

> Challenges with SIC Codes:
Although extremely useful at the start, they ran into issues of mismatches, overlapping and ambiguous descriptions and their limited scope of classification code availability (due to only 2-digits, followed by one digit for each additional category). That constrained the scope of adding new emerging industries and functions.

In 1997, SIC codes were further expanded to NAICS (North American Industrial Classification System), which were 6-digits ling and offered more scope for adding various new industries and functions, as well as clearing ambiguous codes. Here is the same example of the corn farming industry, progressively indicating what a 6-digit NAICS code represents:

a.) First 2-digits “11” (Agriculture, Forestry, Fishing, and Hunting)

b.) First 3-digits “111” (Crop Production)

c.) First 4-digits “1111” (Oilseed and Grain Farming)

d.) First 5-digits “11115” (Corn Farming)

e.) 6-digits “111150” (Corn Farming)

In essence, the SIC codes and NAICS codes are similar. NAICS offers more room and flexibility for accommodating more classification and functions. SIC codes and NAICS codes can be used in tandem. While SIC continues to remain popular for traditional businesses and industries like manufacturing and crop produce, NAICS codes are finding more usage in newly developed segments and industries like technology, due to extended availability with extra digits in the codes. Both find usage in marketing, business listing and analysis functions.

A full list of SIC codes can be found at U.S. Department of Labor’s website and SIC Manual section, while NAICS details are available at the U.S. Census website. These websites also offer sections on how to search SICS and Search NAICS codes. Besides these, there are other sources on the internet offering free SIC and NAICS codes like http://www.siccode.com

Regardless of what business venture you are setting up, industry classification is a necessary requirement at local, regional, and national levels. SIC and NAICS offers the necessary classification codes, making it easy for business analysis, marketing, business listing, data mining and investment decisions for your company. This is an excellent tool I highly recommend to all entrepreneurs.

For more information on SIC and/or NAICS codes, please feel free to reach out to me at:

Allen T. May
cell: 214-893-2623
email: allentmay@gmail.com

HOW DO NAICS & SIC CODES RELATE TO MY MARKETING INITIATIVES?

By: Allen T. May, C.E.O. of Westwood Associates, LLC

Acquiring a Texas shelf company is the easy part for most entrepreneurs. They choose one of our Texas shelf LLCs. Open bank accounts and sign office space leases. They make a few initial hires and drop a few grand at Office Depot. They sit back with tremendous feelings of satisfaction and “see” it all coming together. Life is good! They have a brilliant business idea, they know they product or service and have the energy and drive to make big things happen. Its a beautiful thing indeed. So what about their marketing initiatives? Our entrepreneur may be a custom cabinet maker so he clearly knows who his targeted marketing audience is….or does he?

The first and most obvious use of NAICS & SIC codes is that the allow you to target your marketing to specific industries. Otherwise, you’d be marketing all over the map and wasting valuable cash resources. With the help of NAICS Association, you can acquire a Targeted Marketing List by NAICS & SIC that can be laser targeted to suit your marketing needs. Back in the 1990s I used to purchased mailing labels from Dunn & Bradstreet is a similar fashion. I remember paying $0.10 per label and spending hours working on my own direct mail campaign. It was actually exciting when FedEx delivered my 10,000 labels! Unfortunately, I received a lot of return mail as a result of bad addresses. Still, it was the bomb back in the day to have as a marketing source geared to my targeted audience. The box FedEx delivered was big, heavy and impressive. Dot-matrix printed labels. Now those were the days! I looked at them in awe. I saw lots of dollar signs as I gently affixed each one to an envelope promoting one of my business ventures. I carefully placed them in bins and personally delivered them to the U.S. Post Office. It was a religious experience. We had cocktails afterwards and dreamed of all the responses soon filing our mail box. Our closing ratio averaged 2% and about 25% were returned “Addressee Unknown.”

Technology has and continues to improve so much fewer are returned with bad addresses these days. So, instead of purchasing mailing labels for a broad industry like we did back in the 90s, you may want to know who your ideal customer is. And, that option is available to the savvy entrepreneur. By appending NAICS & SIC code information to your existing customer database, you can determine which industries best represent your ideal customers. By evaluating your most frequent and high paying customers, you can implement strategies to retain your best customers and find more like them. And who doesn’t want more of that?

Imagine the entrepreneur who has a business selling a specialized medical device to hospitals and not realizing there are other potential sales from emergency care clinics. Once you read that sentence it comes across as common sense but many people miss the obvious. Most entrepreneurs have no idea what an NAICS or SIC code is so they miss a huge opportunity to identify similar types of businesses that will have similar types of NAICS codes. For example, if you know that you do well with companies with the NAICS code “236116: New Multifamily Housing Construction”, you may want to look at the 2-digit code “23: Construction”. A 2-digit code allows you to look at all related 6-digit codes in an industry. You may find new business opportunities such as code: “236117: New Housing For-Sale Builders” and “236115: New Single-Family Housing Construction.” Learning to navigate the NAICS structure can open new doors to great prospects and sales leads.

Please feel free to reach out to me to discuss this and any other matters concerning your new business venture. I can be reached at:

Allen T. May
cell: 214-893-2623
email: allentmay@gmail.com

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WHAT EXACTLY ARE NAICS AND SIC CODES?

By: Allen T. May, C.E.O. of Westwood Associates, LLC

NAICS codes are one of those areas of business we seldom see come across our radars and oftentimes, know absolutely nothing about them or why they exist. The IRS wants us to choose one when apply for an EIN number and we need them when filing annual tax returns for Schedule C and other business tax forms. There is a reason for all of this of course and its good policy to have a clear understanding of what they are. Here’s a quick overview for you to get your feet wet. I’ll discuss this matter over several blog posts as to not bore you to death in one setting. Here’s what my research as found:

The Standard Industrial Classification (SIC) system was originally developed in the 1930s to classify establishments by the type of activity in which they are primarily engaged. The purpose of this task was to promote the comparability of establishment data to describe the U.S. and Canadian economies. The SIC has not been updated since 1987, however, the SIC system is still widely used. Some companies, such as Dunn & Bradstreet have created their own 4-digit extension to the original SIC system as a means to update and expand the system so their customers can more precisely define their business classification.

The North American Industry Classification System (NAICS) (pronounced “nakes”) was established in 1997 to replace the no longer sufficient SIC system. Developed in cooperation with the statistical agencies of Canada and Mexico, NAICS establishes a North American Standard that allows for a high level of comparability in business statistics among the three countries. It is the first economic classification system to be constructed based on a single economic concept.

The NAICS code was developed to eliminate the inconsistent logic utilized in the SIC system and to increase specificity from the 4-digit SIC system by creating a 6-digit NAICS code. While the NAICS system utilizes a purely production-oriented structure identifying businesses only by their primary economic activity, the SIC system moves from production-oriented logic to market-oriented logic throughout its structure. This inconsistency is like attributable to the many revisions made throughout the years to a system whose founding documents are lost to history.

I’ll be blogging much more on NAICS codes over the next few weeks. There is some important information regarding the actual NAICS selected by entrepreneurs you will want to know about. I will also share a list of high-risk NAICS codes you will want to avoid if possible. When starting a new business venture, you will want to select an appropriate NAICS code. Worth noting, none of our aged entities have NAICS codes assigned to them. That is a process we can discuss when you acquire one of our shelf corps or shelf LLCs. More on NAICS to come.

Please feel free to reach out to me as follows:

Allen T. May
cell: 214-893-2623
email: allentmay@gmail.com

RELOCATING YOUR BUSINESS ENTITY TO TEXAS

By: Allen T. May, C.E.O. of Westwood Associates, LLC

It seems that every week I am reading in The Wall Street Journal, The New York Times, or some other news media covering businesses relocating their entire enterprise to the State of Texas. The reasons are obvious and endless of course, but the process of effectively doing so are not. Many entrepreneurs choose to cut ties with the state they are leaving if they will no longer be providing products and/or services in that state. In doing so, it alleviates those entrepreneurs from having to file quarterly and annually reports as well as pay taxes with the state they have left. However, if you are leaving one state for another but plan to continue to operate in the state you have moved from, then that’s another matter to consider. For the sake of this blog posting, however, we will assume you are leaving a state for a new life in Texas, as thousands do each year.

If you completely move your corporate offices from your home state to Texas, you have one of three options to consider. You may continue as a corporation in your old state and register as a “foreign” corporation doing business in Texas with the Texas Secretary of State. In doing so, you will be required to file quarterly and/or annually reports to both states. Something to consider for sure. Alternatively, you can dissolve your corporation fully in your old state and form the corporation again in Texas, as a new entity. There are many pros and cons to this option and careful consideration should be made in this area. Lastly, you may do a reorganization, in which you form a new company in Texas and “merge” your old corporation/LLC with it.

If you’ve chosen to operate your business as a Limited Partnership, LLC, or a corporation, you will register with the State of Texas, Office of the Secretary of State, Corporations Section. This requirement is in play regardless which of the above three options you select.

If you’ve decided to operate your business as a sole proprietorship or general partnership, you will need to file an “Assumed Name Certificate” also known as a “DBA” (doing business as) for the name or names of your business. The county clerk where your business will be domiciled in Texas will issue this certificate. Fees vary from county to county, but expect to pay around $15.00 per dba certificate you file, which, is valid for up to 10-years before you will be required to file a renewal with the county clerk’s office. Worth noting, if your business will not have a physical location, you must file a DBA in every Texas county it will operate. For example, a pool company located in Houston, Texas and operating as a sole proprietorship (NOTE: THERE IS A HUGE RISK FACTOR FOR THIS GUY WITH REGARDS TO LIABILITY, BUT THAT’S ANOTHER BLOG POST) would have to file a DBA under the business name it is operating under in Harris County, as well as Montgomery County should it service customers in The Woodlands. First, you have to check the local county records to ensure no one else is currently using the business name you want and its good policy to go ahead and check that name in all surrounding counties before you commit to it. Otherwise, expect a cease-and-desist letter from the attorney representing the other company using the same or similar name you’ve chosen.

Additionally, if your business will be operating out of your home, you must check zoning regulations and product restrictions in order to legally operate. Some municipalities can get very serious about this matter. If your business or product is trademarked, you may need to register it again. Businesses that sell their goods and services only in Texas must register their marks with the State of Texas. Those doing interstate business must register federally.

Texas is one of the top 10 states for lowest overall tax burdens, as residents do not have company tax or individual income tax, Unless your company has an annual revenue north of $1,000,000.00, you may well be exempt form other types of tax as well. For more information on this matter, you can visit the website of the Texas Comptroller of Public Accounts.

Should you decide to dissolve your existing out of state corporation and start fresh with a Texas corporation or LLC, then an aged Texas shelf entity may be the best choice for you. Consider this. Lets assume you owned a general contracting business in California for the past 3 years and decided one day that the outrageous California tax system coupled with its shamefully over burdened business regulatory system was simply more than you could take. So, you relocate to state income tax free Texas. The facts are that you have three solid years of experience running a general contracting business and your have references regarding your quality of work. You can merge those credentials and talent into one of our aged Texas shelf companies that matches your credentials. Hence, you would simply acquire one of our 3-year old corporations or LLCs and hang your shingle in the Great State of Texas!

Please reach out to me if you have any questions regarding this process. You can reach me as follows:

Allen T. May
cell: 214-893-2623
email: allentmay@gmail.com

Texas LLCs....To Be or Not To Be

By: Allen T. May, C.E.O. of Westwood Associates, LLC

Greetings and salutations fellow entrepreneurs. I get a lot of emails regarding an LLC in contrast to the C-Corp and S-Corp so I decided to address it in this week's blog posting. Choosing your legal entity is a crucial choice when starting your new business and you should give it the consideration it well deserves. There is no one answer fits all with this decision. The "right" choice varies from business to business. This is an important matter that you will need to discuss with your partners, if any exist as well as with your CPA. If you don't have a CPA.....GET ONE! Yes, they charge by the hour and yes they can be expensive. However, its money well spent and in the absent of a CPA on your "team" can quickly translate into significant tax liability. I cannot articulate enough the value of hiring a CPA. You don't need to pay the fees commanded by such accounting firms as PriceWaterhouseCoopers, but you do need pay someone who has current business and tax law knowledge and experience. Shoot me an email and I'll gladly recommend a few for you to contact. Okay, enough of my soapbox on hiring skilled accountants. Lets move on.

Which entity you the entrepreneur choose will have a huge impact on your exposure to legal liability as the owner of the company, and will also help determine how much you and your company will pay in federal income taxes. Another aspect your liability can affect? How much your business grows, and how much money you can raise. Here are some considerations to ponder when making a decision for you and your growing business venture, plus some other legal aspects to consider. 

There are three major kinds of entities that you will likely be selecting from for your new business venture; a Limited Liability Company (LLC); a C-Corporation (C-Corp); or an S-Corporation (S-Corp). As with anything, there are pros and cons to each. Here is a quick overview of each of these entities:

> LLC

An LLC is a great choice for many small business owners. Here's why. It protects YOU the business owner from the liabilities and debts just like a C-Corp, but also provides many tax benefits. Specifically, you avoid double taxation and your net revenue is only taxed once on your individual income tax rate. We are certainly keeping our fingers crossed on how President Trump's proposed tax overhaul will affect all of us entrepreneurs. The proposed tax plan calls for a reduction of "pass thru" income tax rate from 39.5% down to a delightful 25%. For an LLC, this could be life changing for small business owners. This proposal was made by the GOP lead Congress and is something we need as Entrepreneurs.

An LLC also allows your business to grow and allows you to add additional members to your company as needed. You can also use different classes of ownership, (also called membership in an LLC), so you are able to have non-voting or non-managing members of your LLC. This allows you to build equity as you build your company. An LLC will usually act as a barrier between your personal and business assets should an issue arise. You MUST have a bank account set up for your business for this to happen and cannot combine your business and personal funds. Always remember: Thou shalt not commingle thy funds.

One potential downside of an LLC is that not all liabilities and debts actually belong to the LLC. Many young businesses get credit or loans by providing a personal guarantee for that debt. So if you're a small business owner and provide your Social Security Number and/or other personal information to get financing, you will be personally liable for that debt, even if your LLC can't pay it back. These issues can possibly be circumvented with the acquisition of an aged shelf company. Once a business entity is 2 to 3 years in age, oftentimes, credit granting companies will not require a personal guarantee from its managing members. This makes for a strong argument on the value of starting off with a Texas shelf company. Money well spent. Please search this blog on various types of business financing options to better serve you and your new business venture's needs. I have put together a detailed list of various credit granting firms to consider when building your business credit. Overall, an LLC is probably the easiest business entity to set up, manage and maintain. 

Even though an LLC is not the ideal entity to use when fundraising, for many business owners, its advantages outweigh other options. For example, in an LLC, business debt generally increases the membership tax basis, which means that members can deduct more business losses on their individual tax returns. Additionally, the higher the investor or members basis, the less capital gains are possible, which translates into less tax when they sell their interest or sell the business. 

> C-Corp

This is a traditional corporation, in which you can have unlimited shareholders, as well as varying classes of stock. With a C-Corp, there are unlimited fundraising options, and you can also "go public" which gives you the benefit of a limited personal liability for business activities. The downsides of a C-Corp are that all net revenues are taxed twice, which is called double taxation. The income is taxed once on the corporate level and once on the individual shareholder's tax return. Double taxation was, for many years, viewed as a sizeable burden for small business owners, which led to the formation of the LLC discussed above. I encourage all of my blog readers to consult with an attorney specializing in securities laws if this is an option you and any potential partners are seriously considering. Securities laws are shamefully complex and good counsel is necessary for the entrepreneur desiring to go down this path. 

> S-Corp

Another option to choose from when forming your business is an S-Corp. An S-Corp is essentially a tax election that arises when a business elects to be taxed under "Subchapter S" or Chapter 1 of the Internal Revenue Service Code. Before electing for an S-Corp status with the IRS, you have to first have another entity for your business, called the "underlying entity." In other words, you have to start off as either a sole proprietorship, a partnership, an LLC, or a traditional C-Corp. Then, you can make the leap to the S-Corp. It is a matter of completing forms you or your CPA would submit to the IRS. You might select an S-Corp because it provides many of the same tax benefits of an LLC. An S-Corp can save a business owner a significant amount of money in self-employment taxes, while with an LLC, all revenue is subject to self-employment taxes.

Maintaining an S-Corp does take extra work as opposed to an LLC. There are several requirements you must fulfill in order to have an S-Corp status. For example, shareholders must adhere to corporate formalities, such as holding both regular and special meetings, keeping minutes of those meetings, and using a written (and format) corporate resolution to document all significant decisions made on behalf of the company. If you don't maintain these corporate formalities, it can result in an entire host of tax ramifications, some of which are significant. They include double taxation, possible back taxes, and penalties, evening being barred from using an S-Corp distinction for 5-years.

Unfortunately, what many entrepreneurs do not realize about S-Corps is that they will only see significant financial benefits if they're revenue is high enough, usually north of $1,000,000.00. Be sure to talk to your CPA before opting for this designation. As I've written before in this blog, S-Corps work well for some entrepreneurs but its not for everyone. 

Some other considerations to weigh when deciding whether to use an S-Corp designation is that there are limitations on the number of shareholders allowed, and you can only issue one class of stock to these shareholders. Moreover, shareholders cannot receive special allocations of profits and losses, which could present difficulties when trying to raise capital from investors. 

Should you decide that an S-Corp works best for you, one of our Texas shelf corporations can be converted into an S-Corp as it meets the IRS requirement of being an "underlying entity."

While each entity has its pros and cons, be sure to do your research and consult a CPA before making your final decision. A good rule of thumb: When in doubt, an LLC is a good choice. I am keeping a close eye on the current tax reform bill and how it will affect small business owners. Its still a long way from landing on President Trump's desk. Tax relief for U.S. businesses can only be good for this great country we call home. 

Please contact me for additional information on available Texas shelf LLCs we currently have in our inventory. You can reach me as follow:

Allen T. May

cell: 214-893-2623

email: allentmay@gmail.com

The Choices: Texas C-Corporation or Texas LLC

By: Allen T. May, C.E.O. of Westwood Associates, LLC

There is nothing more exciting than starting a new business venture. Its one of those things that not everyone "gets" when we attempt to share our excitement with others. While some may see a lot of work, long hours and frustrations, entrepreneurs see opportunity. Starting a new business venture is not about money and risk. Rather, its about opportunity and challenge. 

So how do smart entrepreneurs start with an advantage over other entrepreneurs? There are tremendous benefits for entrepreneurs to start their new business venture with the structure of an aged Limited Liability Company. If you're reading this blog, you've probably narrowed your choice between either the tried-and-true Texas shelf corporation or the Texas shelf LLC. So you're wondering, "Which one is best for me?" There is no universal answer that applies to every business venture. I wish there was, but the corporate laws and tax structure create a menu of options for different situations. Nevertheless, some general principles may prove helpful for you when attempting to select what is best for you. Some of these benefits include:

For the majority of new ventures, the relative simplicity and flexibility of the Texas LLC make it the better choice. This is especially true if your company will hold title to real property that's likely to appreciate in value of the years. That's because regular corporations and their shareholders are subject to a double taxation, hence, both the corporation and the shareholders are taxed at the federal level, on the increased value of the property when the property is sold or the corporation is liquidated. In contrast, the Texas LLC  member-owners avoid this double taxation because the company's federal tax liabilities are passed through to them. The Texas LLC itself doesn't pay a federal tax on its income. 

However, a Texas LLC isn't always the best choice. Occasionally, other factors may tip the balance toward a c-corporation. For example, if you anticipate having multiple investors in your new business venture or to raise capital from the public, you would probably be better served with an aged Texas c-corporation. While the shelf Texas LLC works fine when you have just a few investors, especially those who will be active in the day-to-day operations of the company, it may get more complicated when the number of investors increases over time. For example, you'll likely run into resistance from potential investors if you can't offer then the corporate stock certificates that they perceive to be tangible evidence of their partial ownership of the company. Investors like to have something in their hand that's tangible. 

I remember about 10 years ago I invented in a Denver, Colorado LLC start-up that was "suppose to revolutionize" the online marketplace for trading in high-risk equities. The salesman's pitch was awesome. I bought a 5% stake in the LLC for $150,000.00 and subsequently, I was handed a sheet of paper that indicated I owned "5 units" in the LLC. It was a rather plan document. I was accustomed to the traditional stock certificate with its fancy design. The piece of paper I was handed in exchange of my $150,000.00 check was almost as impressive as the return on my investment.  It was yet another hard lesson in life. So, it may serve you best to structure your new venture as a c-corp. Rather than wasting your time trying to overcome this resistance with investors, it's better to structure your company as a c-corporation. 

If you want to set up a single-member Texas LLC, but you live in a state that requires two or more members, you're in luck! Texas only requires one member! All of the shelf c-corporations and LLCs we offer through Westwood Associates, LLC were formed with a single director (c-corporations) member (LLCs).

Other things need to be considered as well. What if you'd like to provide extensive benefits to owner-employees? Things like a company car, expensive account, health club memberships, etc. Often, when you form a c-corporation, you expect to be both a shareholder (owner) and an employee. The corporation can, for example, hire you to serve as its C.E.O. and pay you a tax-deductible salary. From a tax standpoint, this option is far better than paying you dividends, which can't be deducted by the corporation as a business expense and therefore wind up being taxed TWICE. But corporate employees  (including employees of a c-corporation who are also owners) don't just receive pay - most also receive fringe benefits. These benefits can include the payment of health insurance premiums and direct reimbursement of medical expenses. The corporation can deduct the cost of these benefits and they are not treated as taxable income to the employees. (read: YOU!) Having your own corporation pay for these fringe benefits and then deduct the costs as a business expense can be an attractive feature of doing business through a regular c-corporation. These opportunities for you to receive a tax-favored fringe benefit are somewhat reduced if you do business as an LLC. Moreover, a c-corporation may be able to offer better retirement benefits or options under a corporate retirement plan. You want to entice or keep key employees by offering stock options and stock bonus incentives. Simply put, LLCs don't have stock. Corporations do. While its possible to reward an employee by offering a membership interest in an LLC, the process is awkward and likely to be less attractive to employees. Therefore, if you plan to offer ownership in your business as an employee incentive, it makes sense to incorporate rather than form an LLC.

The best course of action when making this decision of course is to seek out the professional advise of a Texas corporate attorney as well as that of a Texas CPA. It is money well spent. This is a huge decision you need to make and you must perform diligent research before committing to either a c-corp or an LLC. 

For additional information, please feel free to contact me:

Allen T May

cell: 214-893-2623

email: allentmay@gmail.com