Business-Minded Legal Solutions

Tax-advantaged structures for business transactions

Businesses in Texas can benefit from various tax-advantaged structures. These structures help reduce tax liability and improve financial efficiency.

Using these options can make a significant difference in the overall profitability of a business.

Limited liability companies

Limited liability companies offer tax flexibility. LLCs have the potential to taxed as a sole proprietorship, partnership, S corporation or C corporation, or even disregarded for tax purposes. This flexibility allows businesses to construct the structure that best suits their financial goals and minimizes their tax burden.

S corporations

Subchapter S corporations provide tax benefits by allowing income to pass through to shareholders. This means the business itself does not pay federal income taxes. Instead, shareholders report the income on their personal tax returns. This structure helps avoid the double taxation that applies to C corporations and can result in significant tax savings.

C corporations

Subchapter C corporations may be the optimal entity when investors are foreign and do not want to subject themselves to US income tax reporting obligations.  They can also offer advantages for reinvesting profits. C corporations can deduct certain expenses, such as salaries and benefits, from their taxable income. Additionally, C corporations can take advantage of tax rates on retained earnings that may be lower than the marginal rate applicable to their shareholders.


Partnerships allow income to pass through to partners, avoiding the double taxation that applies to C corporations. Each partner reports their share of the taxable income on their own income tax returns. This structure provides flexibility with the allocation of profits and distributions, and flexibility in governance options, making it a popular choice for many businesses.

Tax incentives and credits

Texas offers various tax incentives and credits for businesses. These include the Texas Enterprise Fund, which provides grants for job creation, and the Texas Research and Development Tax Credit, which encourages innovation. Utilizing these incentives can further reduce a business’s tax liability. An attorney experienced in business law can help you determine your eligibility for these incentives.

Choosing the right tax-advantaged structure is important for businesses in Texas. Working with lawyers who understand the nuances of the different structures can help you determine what will work for your business.