When you plan to start a business in Texas, you must decide on the appropriate structure. Starting a corporation may be more complicated than creating an LLC in Texas or a sole proprietorship. However, it is not that difficult as well. There are a few guidelines that you should be aware of when it comes to creating Texas corporation. Starting a corporation involves a legal process, that is, the process of incorporation.
In this article, I will share a step-by-step guide to start a corporation in Texas. I will also enlighten you on the advantages and disadvantages of having a corporation. Some people consider starting a corporation in Texas more than other business structures since it has many advantages over other forms.
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What is a Corporation in TexasHow to Start a Corporation in TexasImportant InformationAdvantages of Starting a Corporation in TexasFAQs
What is a Corporation in Texas
In definition, a corporation is a formal organization established by stockholders, shareholders, or other people to make a profit. Like individuals, corporations can undertake contracts, own assets, sue and be sued, pay taxes, limit state and federal taxes, and loan funds from banking institutions.
Common Types of Corporations
Before you start with the process of forming a corporation, you should know what type of corporation you will form. There are several different forms of corporations you can take into consideration, depending on your corporation’s objectives and ownership structure.
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C-Corporation: C-Corporation is the most known type of incorporation. They have almost all corporate distinguishing characteristics. Profits are distributed to corporate owners who are taxed at an individual level. The corporation is taxed similarly to a business unit.
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S-Corporation: An S-Corporation is set up similarly to a C-corporation but has different tax implications and owner limits. S-corps have no more than 100 stockholders and are not taxed separately. These business units must also file paperwork with the Internal Revenue Service (IRS) to obtain their status.
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Non-profit Corporation: Nonprofit businesses are frequently used by religious, educational, and charity institutions to run their operations without making a profit. Thus, a nonprofit corporation is exempt from paying taxes. The nonprofit organization’s gifts, contributions, or cash are reinvested in the company to fund its growth, future endeavors, or operations. Read how to start a nonprofit corp in Texas to learn about nonprofit corporations.
If you have a small business, it is recommended that you form an LLC instead of a corporation in Texas. LLCs have more tax benefits than other structures. Besides, LLCs protect your personal assets. However, it is wise to consult a legal expert before you start setting up your business in Texas.
– LLCBuddy Editorial Team
How to Start a Corporation in Texas
To start a corporation in Texas, you must follow the below steps that, include forming a corporation name, appointing a board of directors, filing for Certificate of Formation – For Profit Corporation, drafting corporate bylaws, meeting with the board of directors, issuing stocks, creating a shareholders agreement, requesting for an EIN, and getting a license and permit. All these steps are basic ones. It can be changed depending on the type of corporation you form and the nature of your business.
Step 1Choose a Corporation Name in Texas
Naming your business is one of the most crucial activities during the startup phase. Your corporation name serves as the foundation for your brand. Legal procedures should be taken into account when choosing your corporation name. Choose a corporation name that will enable you to develop a strong brand identity without being hampered by irrelevant factors.
If you are forming an LLC, there is a complete guide on Texas LLC name guidelines for a proper LLC name. Here are some guidelines you must follow while naming your corporation in Texas-
- Your business name must contain entity identifiers, such as “Incorporated,” “Limited,” “Corporation,” or “Company,” or an abbreviation, such as “Inc.,” “Co.,” or “Ltd.”
- Exclude any words in your business name, such as “Trust,” “Bank,” “Credit Union,” or “Trustee,” or words related to a government agency, such as “FBI,” “State Department,” or “Treasury.”
Step 2Board of Directors Initial Appointment
To form a corporation in Texas, you must appoint an initial board of directors before making them permanent once the corporation is formed. In Texas, you may appoint at least Three board of directors. The initial board of directors is in charge of guiding the overall strategy of your business. The structure, responsibilities, and powers given to a board of directors are determined by the bylaws of a company or organization. So, appointing your corporation’s initial board of directors in Texas is a big step in forming a corporation.
Step 3Filing the Certificate of Formation – For Profit Corporation in Texas
After you appoint the initial board of directors in your Texas corporation, the next step is to write and file a Certificate of Formation – For Profit Corporation. In writing, the Texas Certificate of Formation – For Profit Corporation, the corporation name, principal place of business, the purpose of business, Texas Registered Agent contact information, and the names and addresses of incorporators and/or initial board members, should be written.
Filing a Certificate of Formation – For Profit Corporation in Texas may be done with four methods that are online, fax, by mail and in-person. The Certificate of Formation – For Profit Corporation fee may vary from different states. However, in Texas, it costs $300 for filing online, by mail, in person filing, or by Fax.
- Online Filing: Create an account/Log in to the SOS site, get the e-form, fill it, and submit online. Or get the online PDF, fill it up and upload it back on the site.
- Offline filing: Send the form by mail to or drop it off in person at Secretary of State, P.O. Box 13697, Austin, TX 78711-3697. Or Fax it to (512) 463 – 5709
Step 4Draft Corporate Bylaws
Now you are done filing a Certificate of Formation – For Profit Corporation in Texas, the next step is to draft corporate bylaws. Corporate bylaws are the basic rules that control a corporation. It includes the organization’s structure, processes, laws, and rules. As a result, all personnel, managers, and corporation members must obey the firm’s rules.
In creating corporate bylaws, you should include the following on how the decisions will be made-
- The responsibilities are given to each officer.
- How will judgments in business be made?
- Where and when are the annual shareholder meetings?
- The minimum number of shareholders required for decision-making.
- Location and timing of dividend payments.
Step 5Hold the First Board of Directors’ Meeting
After drafting the corporate bylaws, gather all the board of directors for the first meeting. This meeting will be finalized by appointing directors to manage the company’s daily operations, approve the bylaws, choose the corporation’s accounting year, and approve the stock issue. All board meetings should have minutes taken and stored with the company’s records.
Step 6Issuing Stock in a Corporation
After starting your Texas corporation, one of the first official corporate actions is issuing stock to the shareholders. Keep track of the number of shares issued to each shareholder and the purchase price. A corporation in Texas is managed by its shareholders, who contribute to the business in exchange for ownership shares.
Step 7Draft and Finalize a Shareholders Agreement
Even though drafting and finalizing a shareholders agreement is unnecessary, I suggest you still comply since it will benefit your corporation and its shareholders. A small business’s shareholders enter into a shareholder agreement contract. It establishes how ownership will be handled in unexpected situations, like a shareholder passes away, retires, becomes disabled, or quits the corporation. Early on in the life of your Texas corporation, signing a shareholders’ agreement can help maintain corporate continuity and prevent future disputes.
Step 8Request an EIN in Texas
After everything is in place, you should get or request an Employer Identification Number (EIN). An EIN will serve as the tax ID for your Texas corporation. EIN can be obtained from the Internal Revenue Service (IRS). It is a 9-digit number similar to Social Security Number. EIN, however, is distinct from SSN. It is only used for business-related activities, particularly for submitting general taxes. The form must be completed and uploaded to the IRS website.
The application of an EIN in Texas can be through the following:
- Apply Online- The EIN online application is the preferred method for customers to apply for and obtain an EIN.
- Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that Form SS-4 contains all of the required information.
- Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is 4 weeks.
- Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.
After you have your EIN number, you can benefit in a number of ways. It will give your corporation the final advantage necessary to operate at full capacity without encountering legal or judicial issues.
Step 9Get Licenses and Permits for your Corporation in Texas
Before your corporation operates in Texas, you must have a business license. A business license is a document issued by a government agency that permits you to operate your business in the geographic region that that agency governs. To legally operate your corporation, you’ll need a business license. Numerous corporate licenses need to be filed and renewed regularly. Check out how to get business licenses and permits in Texas to know more.
You must also register a DBA name if you intend to conduct business using a name other than your corporation’s legal name. The DBA name is sometimes known as “doing business as” or a “fictitious business name.” Depending on your location, you may need to register the DBA with your state, city, and county. You can skip this step if your business solely uses your legal company name.
Important Information
Paying your Taxes in Texas
Even if you have established your corporation in Texas, pay your taxes and keep everything up to date so you won’t pay any penalty. Unlike an LLC, there is a corporate tax that every corporation in Texas has to pay. On the other hand, they must pay income taxes based on their business income. Some other types of taxes in Texas are sales tax, franchise tax (not applicable to all the states), and other state taxes.
Cost of Forming a Corporation in Texas
A filing and annual fee must be paid to form a corporation in Texas. Without it, your corporation won’t operate. The initial filing fee for a corporation may vary depending on the state. However, in Texas, it costs $300 for filing online, by mail, in person filing, or by Fax. The corporation in Texas also has to file an annual report (though it might not be mandatory, it is recommended to file one). Ensure you comply with all the necessary fees and costs so your corporation will run successfully and smoothly. If, in the future, you make any changes to your corporation, you must file the Texas Amendment. It costs $25 to file an amendment in Texas.
Advantages of Starting a Corporation in Texas
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Limited Liability: The biggest advantage of setting up a Texas corporation is that the shareholders are not personally responsible for the debts of the company. As a result, when you incorporate as a corporation, personal assets like homes, vehicles, and other possessions are prohibited. One of the main benefits of setting up a corporation over a general partnership or sole proprietorship business structure is that neither the business nor the owners are held legally responsible for the obligations of the business, even if it means giving up their personal assets.
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Limitless Corporation: The fact that a corporation’s existence is independent of its owners is another significant benefit of incorporation. In other words, a corporation has an endless life and will continue operating normally even if the owner dies or decides to sell their ownership.
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Advantages in Tax: The deduction of health insurance premium payments made on behalf of an owner-employee is one of the many financial benefits to which corporations are entitled. Corporations also save on self-employment taxes since their revenue is not subject to workers’ compensation, Social Security, or medical taxes. Tax rates on corporate profits are lower than those on individual income.
FAQs
How do I start a corporation in Texas?
To start a corporation in Texas, you must file articles of incorporation with the Texas Secretary of State. You will also need to obtain a registered agent in Texas, obtain an EIN from the IRS, and obtain any other necessary licenses or permits.
What is the cost to form a corporation in Texas?
The cost to form a corporation in Texas varies depending on the type of corporation you are forming. The filing fee for a standard corporation is $300, and the annual franchise tax fee is $200. Other fees or permits may also be required.
What taxes must a Texas corporation pay?
A Texas corporation is required to pay federal, state, and local taxes. The primary taxes are the federal income tax and the Texas franchise tax. Additionally, depending on the type of services or products the corporation provides, other taxes may be required.
Do I need an EIN to start a corporation in Texas?
Yes, an EIN is required to start a corporation in Texas. The EIN must be obtained from the IRS in order to open a corporate bank account and to file tax returns.
What is the process for forming a corporation in Texas?
The process for forming a corporation in Texas involves filing articles of incorporation with the Texas Secretary of State, obtaining a registered agent in Texas, obtaining an EIN from the IRS, and obtaining any other necessary licenses or permits.
What type of documents are required to form a corporation in Texas?
The documents required to form a corporation in Texas include articles of incorporation, a registered agent, an EIN from the IRS, and any other necessary licenses or permits.
What is a registered agent and why do I need one in Texas?
A registered agent is an individual or business entity that is authorized to receive legal documents on behalf of a corporation. This is required in Texas in order to be able to do business in the state.
Do I need to hold a corporate meeting in Texas?
Yes, a corporate meeting must be held in Texas in order to comply with the state’s corporate laws. This meeting must be recorded and the minutes must be kept on file.
How often must a Texas corporation hold meetings?
Texas corporations are required to hold annual meetings in order to comply with the state’s corporate laws. Additional meetings may be required depending on the circumstances.
What is the deadline for filing articles of incorporation in Texas?
Articles of incorporation must be filed with the Texas Secretary of State within 90 days of the date of execution.
What is the process for dissolving a corporation in Texas?
The process for dissolving a corporation in Texas involves filing articles of dissolution with the Texas Secretary of State, cancelling all licenses and permits, and notifying creditors and employees.
Is it possible to reinstate a corporation in Texas?
Yes, it is possible to reinstate a corporation in Texas. This involves filing a certificate of reinstatement with the Texas Secretary of State, paying all applicable fees, and providing any other required documents.
What are the steps to start a corporation in Texas?
The steps to start a corporation in Texas are
What is the cost to start a corporation in Texas?
The cost to start a corporation in Texas will vary depending on the type of corporation and the services you choose, but typically filing the articles of incorporation with the Texas Secretary of State is the most expensive part and can cost anywhere from $50 to $300.
What is the minimum paid-in capital for a corporation in Texas?
There is no minimum amount of paid-in capital required to form a corporation in Texas.
What are the types of corporations that can be formed in Texas?
The types of corporations that can be formed in Texas include C corporations, S corporations, professional corporations, limited liability companies, and limited partnerships.
What are the tax requirements for a corporation in Texas?
The tax requirements for a corporation in Texas will vary depending on the type of entity, but generally corporations must register with the Texas Comptroller of Public Accounts and obtain an Employer Identification Number (EIN) from the IRS. Corporations must also comply with state and federal tax requirements.
What is the Texas franchise tax?
The Texas franchise tax is an annual tax imposed on certain types of businesses, including corporations, that are formed or registered in Texas. The rate of the franchise tax is 0.75% of the taxable margin of the business.
What is the filing deadline for the Texas franchise tax?
The filing deadline for the Texas franchise tax is May 15th of each year.
What are the annual reporting requirements for a corporation in Texas?
The annual reporting requirements for a corporation in Texas include filing a franchise tax report with the Texas Comptroller of Public Accounts, filing an annual report with the Texas Secretary of State, and keeping records of all meetings of the board of directors and shareholders.
Are there any additional requirements for foreign corporations doing business in Texas?
Yes, foreign corporations doing business in Texas must register with the Texas Secretary of State and comply with state and federal tax requirements. Foreign corporations must also appoint a registered agent in Texas and may be required to obtain a certificate of authority from the Texas Secretary of State.
What type of documents do I need to file in Texas to start a corporation?
The documents you will need to file in Texas to start a corporation include the Certificate of Formation, which is filed with the Texas Secretary of State, and the Articles of Incorporation.
What is the fee for filing documents in Texas to start a corporation?
The filing fee for forming a corporation in Texas is $300.
What types of corporations can be formed in Texas?
In Texas, corporations can be formed as C Corporations, S Corporations, and Professional Corporations.
Is there a specific name I need to use when forming a corporation in Texas?
When forming a corporation in Texas, the name must contain the word “Corporation,” “Company,” “Incorporated,” or “Limited” or the abbreviations “Corp.,” “Co.,” “Inc.,” or “Ltd.”
What is the minimum number of shareholders required to form a corporation in Texas?
The minimum number of shareholders required to form a corporation in Texas is one.
What is the process for obtaining a registered agent in Texas?
To obtain a registered agent in Texas, you will need to file Form 501 with the Texas Secretary of State. The form requires the registered agent’s name and address, as well as the name and address of the corporation.
What is the filing fee for obtaining a registered agent in Texas?
The filing fee for obtaining a registered agent in Texas is $25.
Are there any specific taxes that a corporation in Texas is required to pay?
Yes, a corporation in Texas is required to pay the franchise tax, which is based on the corporation’s net income. The corporation may also be required to pay other taxes, such as sales and use taxes, payroll taxes, and property taxes.
What is the process for obtaining an Employer Identification Number (EIN) in Texas?
To obtain an Employer Identification Number (EIN) in Texas, you will need to file Form SS-4 with the Internal Revenue Service (IRS).
What is the process for obtaining licenses and permits in Texas?
The process for obtaining licenses and permits in Texas depends on the type of business you are forming. You may need to contact the Texas Department of Licensing and Regulation, the Texas Department of Public Safety, and/or the Texas Comptroller of Public Accounts for information on the licenses and permits required for your business.
Are there any other requirements I need to meet in order to start a corporation in Texas?
Yes, you may need to meet other requirements, such as holding initial meetings of the board of directors and shareholders, preparing and adopting corporate bylaws, issuing stock certificates, and filing annual reports.
Also Read
- Start a Alabama Corporation
- Start a Alaska Corporation
- Start a Arizona Corporation
- Start a Arkansas Corporation
- Start a California Corporation
- Start a Colorado Corporation
- Start a Connecticut Corporation
- Start a DC Corporation
- Start a Delaware Corporation
- Start a Florida Corporation
- Start a Georgia Corporation
- Start a Hawaii Corporation
- Start a Idaho Corporation
- Start a Illinois Corporation
- Start a Indiana Corporation
- Start a Iowa Corporation
- Start a Kansas Corporation
- Start a Kentucky Corporation
- Start a Louisiana Corporation
- Start a Maine Corporation
- Start a Maryland Corporation
- Start a Massachusetts Corporation
- Start a Michigan Corporation
- Start a Minnesota Corporation
- Start a Mississippi Corporation
- Start a Missouri Corporation
- Start a Montana Corporation
- Start a Nebraska Corporation
- Start a Nevada Corporation
- Start a New Hampshire Corporation
- Start a New Jersey Corporation
- Start a New Mexico Corporation
- Start a New York Corporation
- Start a North Carolina Corporation
- Start a North Dakota Corporation
- Start a Ohio Corporation
- Start a Oklahoma Corporation
- Start a Oregon Corporation
- Start a Pennsylvania Corporation
- Start a Rhode Island Corporation
- Start a South Carolina Corporation
- Start a South Dakota Corporation
- Start a Tennessee Corporation
- Start a Texas Corporation
- Start a Utah Corporation
- Start a Vermont Corporation
- Start a Virginia Corporation
- Start a Washington Corporation
- Start a West Virginia Corporation
- Start a Wisconsin Corporation
- Start a Wyoming Corporation
Why Texas Corporation is So Important
One of the key reasons that Texas Corporation is so important is its sheer size. The state’s economy is the second largest in the country, and it is home to some of the largest and most influential corporations in the world. These companies span a wide range of industries, from energy to technology to healthcare, and their success has helped push Texas to the forefront of the business world.
Another reason for the importance of Texas Corporation is the state’s business-friendly environment. Texas has long been known for its low taxes, minimal regulations, and pro-business policies, which have attracted companies from across the country and around the world. This has created a vibrant business ecosystem that encourages innovation, growth, and entrepreneurship, and has helped establish Texas as a global hub for business and investment.
In addition to its business-friendly environment, Texas is also home to a highly skilled workforce. The state boasts a large and diverse population that is well-educated and highly trained, making it an attractive location for companies looking to hire top talent. This skilled workforce is a key factor in the success of Texas Corporation and has helped drive the state’s economic growth and prosperity.
Furthermore, Texas Corporation is important because of its significant contributions to the overall economy of the United States. The state’s corporations generate billions of dollars in revenue each year, which has a ripple effect on the national economy. Their success creates jobs, drives innovation, and fuels growth, benefiting not only Texas but the entire country.
Texas Corporation is also important in the global context. Many of the state’s corporations have a strong international presence, doing business in markets around the world. Their influence extends far beyond Texas borders, shaping industries, driving economies, and shaping global trends.
In conclusion, Texas Corporation is a critical component of the economy, both in the United States and around the world. The state’s corporations are leaders in their respective industries, driving innovation, creating jobs, and making significant contributions to the economy. Their success reflects the business-friendly environment, skilled workforce, and entrepreneurial spirit that define Texas, and underscores the importance of this state in the world of business and industry.
Conclusion
When determining which corporate form is best for you, be selective. You must know which business structure is bet-fitted for your product/service in Texas. Consult a legal professional before you take the first step while setting up your business. Finding the ideal ratio of corporate advantages and legal protection that meets your unique needs is very important. In forming a corporation in Texas, you need to ensure that every detail is well-formed so that your corporation will be successful. And if you have any questions, share them in the comment section below.
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