Maintaining your business entity is about more than just the setup—it’s about the upkeep. In this video, we explore the paperwork and tax realities for LLCs and Corporations, with a special focus on the administrative advantages of Texas-based businesses.

The Written Version

Ongoing Legal and Compliance Requirements
What are the ongoing legal and compliance requirements for maintaining an LLC or DBA in good standing?
DBA (Sole Proprietorship)

With a DBA, you are a sole proprietor; you are your business. Therefore, you simply report your earnings on your federal tax return as you would with any normal income. We are fortunate in Texas that we do not have a state personal income tax return to file.

LLC or Corporation
If you own an LLC or a corporation, you must also file your tax reports. In Texas, we have a margin tax, sometimes called a franchise report. This can be filed annually or quarterly. You must file this report even if your revenue is zero. After that, you must also complete your federal taxes.

Avoiding Commingling
The other critical piece of advice I give is: do not commingle your funds. If you are a sole proprietor, co-mingling doesn’t really matter because you are the business. However, if you own an LLC or a corporation, you must keep those funds separate.
For instance, if you have an LLC and need to pay your home’s water bill, you do not pay it directly with LLC money. Instead, the LLC pays you compensation, such as a draw or distribution, and then you personally pay your personal bill. That is how you avoid co-mingling.

Texas vs. Other States
Keeping things separate is the most significant part of maintenance in Texas. You may read on the internet that you should set up your LLC in Delaware, Wyoming, or Nevada. Those states require annual filing reports and fees. Texas does not have an annual filing report, which makes it less expensive in the long run because you avoid those annual report fees.