By Courtney P. Cowan, JD, ByrdAdatto
Beginning Labor Day Weekend through the first few weeks of 2020, you will find ByrdAdatto attorney Robert Fisher proudly wearing the same red fishing shirt imprinted with the distinctive University of Georgia “G” logo. That garish shirt signals to everyone in the office that college football is upon us. We take football seriously at ByrdAdatto—and in the state of Texas, generally—so it seemed fitting to compare the similarities of our two loves of college football and limited liability companies (LLCs). “What could these two things possibly have in common?” you ask. The answer is simple: absolutely nothing.
But that hasn’t seemed to stop people, particularly college football coaches, from using LLCs as a means of conducting business. Originally used as a way to circumvent the optics of making more money than prominent state officials, collegiate head coaches formed LLCs to function as depositories for the large amount of supplemental income they received in addition to their base salaries. A recent Dallas Morning News article detailed some of the reasons for doing this, including tax relief and liability protection.
While we appreciate the publicity the head football coaches bring to the LLC, these reasons are not novel to those familiar with this business structure. Many business owners, accountants and attorneys have long been proponents of the LLC due to the advantages offered by it, including:
- Tax flexibility: The LLC can elect to be taxed as a disregarded entity, partnership or corporation (s-corporation or c-corporation). By default, an LLC is taxed as a “pass-through entity” (i.e., a disregarded entity or partnership, depending on the number of members), meaning all of the profits and losses of the LLC “pass through” the LLC to the members, who then report the profits and losses on their personal tax returns. The LLC itself does not pay federal income taxes, unless it elects to be taxed as a c-corporation.
- Limited personal liability: The owners (members) of an LLC are protected from the liabilities and creditors of the LLC as long as the LLC is formed and operated properly. Moreover, LLCs provide protection against outside liabilities (i.e., the liabilities of the other members).
- Perpetual existence: The LLC can survive the death of its owners. This means the business will survive even if its owners do not.
Whether you are a Power Five coach making millions or a small medical spa, virtually anyone can form and take advantage of the benefits of an LLC.
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As the daughter of a periodontist, Courtney P. Cowan has been fascinated by the health care field since childhood. She often accompanied her father to his office, where she developed an appreciation for physicians and their respective practices. Having absolutely none of the dexterity that is required to be a surgeon, however, Cowan instead decided to pursue a degree in business while attending Baylor University. It wasn’t until she was required to take a business law course that she discovered her passion for the law. After graduating from Southern Methodist University Dedman School of Law, Cowan serendipitously connected with ByrdAdatto and now assists clients by combining her business background with her enthusiasm for health care and the law.