Professional Documents
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by KJ Henderson
An LLC affords its owners, called members, limited liability, without many of the hassles of maintaining a corporation. It
indemnifies members from certain financial risk, such as when a consumer sues the organization. In addition, unlike
corporations, LLCs are not taxed. This key feature eliminates the burden of double taxation of members.
The record-keeping requirements for an LLC, including those surrounding accounting and management, are not as
stringent as the laws imposed on corporations. In some states, corporations are required to file an annual report whereas
LLCs are not. This makes the monthly and annual accounting process much simpler for the owners.
Taxes
Prior to establishing an LLC, an entrepreneur must understand how these entities are taxed by the federal and state
government. This will ensure she files her business taxes in accordance with the law. The best way to do this is to
consult a qualified tax professional.
The Internal Revenue Service does not tax LLCs. All revenue is reported on the individual tax returns of the owners. In
many instances, owners will also have to pay self-employment taxes. Depending upon the nature of its business, there
are a variety of state taxes an LLC must pay. In Texas, these rules are administered and enforced by the Texas
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Comptroller of Public Accounts.
General Ledger
Taxes aside, the accounting practices of an LLC are similar to those of other business entities. As such, the most
important document an LLC can maintain is a general ledger. A general ledger is the financial backbone of an LLC. Just
as an individual maintains a checkbook that highlights each banking transaction he has executed, businesses use a
general ledger to document the money that is spent and received on a daily basis. In addition to monetary assets, such
as cash and investment, non-monetary assets, such as real estate and valuable office machinery, are included on the
general ledger. Liabilities like loans and lines of credit are also included.
A general ledger affords entrepreneurs the ability to audit every financial transaction that has been carried out by the
firm. This is particularly important for companies that provide services in heavily regulated industries. Ease of reporting
also comes in handy when an entrepreneur is seeking capital from external investors or is attempting to sell the
business.
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References (3)
State of Texas: Certificate of Formation for Limited Liability Company
Nolo: Online Texas LLC FAQ
Businesstown.com: General Ledger
Resources (1)
Texas Comptroller of Public Accounts
About the Author
KJ Henderson has more than a decade of HR and talent acquisition experience. He has held roles at a Fortune 100
investment bank, a media conglomerate and at one of NYC's largest executive staffing firms. He currently heads
recruitment sourcing at a major movie studio. He read literature at Oxford.
Photo Credits
tax forms image by Chad McDermott from Fotolia.com