Choosing the right business structure is one of the most important decisions when starting a company in Texas. The two most common options—limited Liability Company (LLC) and Corporation (C-corp or S-corp)—each offer unique benefits, tax implications, and compliance requirements.

For 2025 and beyond, business owners must be aware of new compliance rules, including Texas franchise tax updates and federal reporting requirements under the Corporate Transparency Act (CTA).

This guide breaks down the key differences between LLCs and corporations in Texas, helping you make the best decision for your business.

Key Differences: LLC vs. S-Corp vs. C-Corp (2025 Update)

Below is a quick comparison of LLCs, S-Corps, and C-Corps, including tax treatment, ownership rules, and compliance requirements.

What Is an LLC?

A Limited Liability Company (LLC) is a flexible business structure that protects personal assets while allowing business owners to avoid corporate taxes.

Example: The Solo Entrepreneur

Emma is a freelance marketing consultant who wants to keep her business finances separate from personal assets. She doesn’t plan to raise capital from investors and prefers a simple tax structure. By forming an LLC, she protects her personal assets while avoiding corporate taxes.

Advantages of an LLC

• Pass-through taxation – Profits go directly to owners and are taxed only once.

• Limited liability – Personal assets are protected from business debts.

• Less paperwork – No requirement for annual board meetings or formalities.

• Flexible management – Owners can run the business themselves or hire a manager.

New Compliance Requirements for LLCs in 2025

✔️ Corporate Transparency Act (CTA) Reporting:

• As of January 1, 2024, all LLCs must report Beneficial Ownership Information (BOI) to FinCEN. This includes details about individuals who own or control the business.

• 📌 Deadline for new LLCs: 30 days after formation.

• More info: https://www.fincen.gov/boi

✔️ Texas Franchise Tax Filing:

• LLCs operating in Texas must file an annual Franchise Tax Report with the Texas Comptroller’s Office.

• Businesses under the revenue threshold must still file a report but may qualify for a “no tax due” status.

• 📌 More info: https://comptroller.texas.gov/taxes/franchise/forms/2025-franchise.php

Disadvantages of an LLC

• Harder to raise capital – Investors typically prefer corporations.

• Subject to self-employment taxes on all profits.

• Not ideal for businesses planning to go public or raise large investments.

📌 Best for: Freelancers, real estate investors, small businesses, and startups that want flexibility and liability protection without corporate complexity.

What Is a Corporation?

A corporation is a separate legal entity that offers strong liability protection and makes it easier to raise capital through investors or stock issuance.

Example: The Startup Founders

David and Lisa are launching a tech startup and plan to raise venture capital. Since investors prefer corporations for stock issuance and structured governance, they form a C-Corp to attract funding and plan for long-term growth.

New Compliance Requirements for Corporations in 2025

• BOI Reporting Requirement: Just like LLCs, corporations must file a Beneficial Ownership Information Report under the CTA.

• Texas Franchise Tax Filing: Corporations must file an annual Franchise Tax Report in Texas, just like LLCs.

• 📌 More details: https://comptroller.texas.gov/taxes/franchise/

Final Thoughts: LLC vs. Corporation in Texas (2025 Edition)

The best choice depends on your business goals, growth plans, and tax preferences.

• LLCs are great for small businesses, freelancers, and startups looking for flexibility and ease of management.

• Corporations are ideal for growth-oriented companies that need outside investment, credibility, and structured governance.

📌 Still unsure which structure is right for you? Jupid Tax simplifies LLC formation, bookkeeping, and tax compliance with our AI-powered assistant.

👉 Need help setting up your business? Jupid.com

References & Resources

Texas Secretary of State – Business Entities – https://www.sos.state.tx.us/corp/forms_boc.shtml

FinCEN – BOI Reporting – https://www.fincen.gov/boi

IRS – LLC vs. Corporation Taxation – https://www.irs.gov/businesses/small-businesses-self-employed/business-structures