I need help in deciding what type of corporation to set up - S Corp or LLC?Also do I need a business license for Texas?

STANDARD DISCLAIMER - I'm not your attorney, and this isn't legal advice.

I love LLCs for many reasons and have to be convinced to choose something different. I think your best bet is to form an LLC that makes an S election. This should allow you the protection LLCs provide regarding charging orders, and also allows you the opportunity to minimize (self-)employment taxes (including Medicare and Social Security taxes).

Texas used to have some goofy taxes on LLCs. I believe those were eliminated in 2006. Check with a Texas business/corporate attorney before making your decision.

She has to perform real services for the LLC or S Corp or else the IRS can come back in an audit and disallow the deduction that you would be taking on the corporate return for the wages paid to her. So keep it legit.

Also, to decrease the employment taxes the entity would have to be an S Corp, C Corp or an LLC electing S status. You should talk to an tax attorney or cpa about getting this right. If you do the $$ right a C Corp could result in less taxes on the entire amount.

Disclaimer. I am not your lawyer. The information provided is merely for educational use. Contact a lawyer in your state.