The 6 Steps to Forming a Corporation in Texas Include:
- Choose a Name
- Select a Registered Agent
- Appoint Management
- File a Certificate of Formation
- Select a Form of Corporation
- Complete Operational Duties
As a Texas entrepreneur, starting a business is equal parts exciting and scary. Legal formalities like how to start a corporation in Texas can seem especially daunting when you are worried about how to make payroll. However, setting your business up with a firm legal foundation can help your business grow.
In this blog post, the Hunnicutt Law Group team will walk you through the process of starting a corporation in Texas. As business lawyers, we want to help entrepreneurs like you build healthy businesses from the start. Our guide on how to form a corporation in Texas should help you along the journey.
6 Easy Steps to Forming a Corporation in Texas
1. Choosing a Name
Many Texans find choosing the perfect name for their company the most challenging part of forming a corporation in Texas. Your corporation’s name needs to be unique with respect to other Texas companies. It must also contain words like “Incorporated,” “Corporation,” “Company,” or “Limited” to identify it as a corporation.
You can use the Texas Secretary of State’s search tool (registration required) or the Texas Taxable Entity Database to determine whether your name is available.
2. Selecting a Registered Agent
A question lawyers often get about how to form a corporation in Texas is, “What is a registered agent?” Registered agents are professionals who accept official correspondence for your business. This can include government notices, tax forms, and service of process. They will then send you a copy of these documents.
Under Texas law, each corporation must have a registered agent. If a law firm sets up your corporation, sometimes your lawyer will act as your registered agent for an additional fee.
3. Appointing Management
Texas law requires you to specify at least one director on your Certificate of Formation. Think carefully about who you appoint to your management when forming a corporation in Texas. Directors and officers play an important role in company management. They are also the public face of the company.
4. Filing Your Certificate of Formation
The last formality in starting a Texas corporation is filing your Certificate of Formation. In this form, you will detail the following:
- Purpose of the corporation,
- Number of authorized shares,
- Par value of shares,
- Names of directors, and
- Registered agent.
This is not an exhaustive list of all information you will need to include when starting a Texas corporation. Consult with an experienced Texas business lawyer to confirm your filing is in order.
5. Select Form of Corporation
There are two forms of for-profit corporations in Texas. We will discuss each below.
Form a C corp in Texas
A C corp is the default form of corporation in Texas. It allows you to have an unlimited number of shareholders. You can raise funds by offering stock. If you choose to be a C corp, you do not have to do anything further once you have filed your Certificate of Formation.
However, before forming a Texas corporation, you should know that corporations are subject to double taxation. Corporations pay corporate tax on revenue, and individual shareholders pay income tax on their gains.
Form an S corp in Texas
S corps can be formed only after filing additional paperwork with the Internal Revenue Service (IRS) once your business entity is formed. S corps are technically tax elections and not separate entities. S corps are taxed at the personal income tax rate of its shareholders.
S corps have restrictions on the number of shareholders allowed. S corps can also only issue one class of stock. Before starting a corporation in Texas, make sure to confirm whether an S corp election is right for your business.
6. Complete Operational Duties
You have navigated how to start a corporation in Texas. Now, you will need to take care of starting your business operations. Key tasks ahead include:
- Preparing corporate bylaws,
- Appointing officers,
- Issuing stock, and
- Obtaining federal and state tax identification numbers.
Do not struggle through these important tasks alone. Make sure to speak with an experienced Texas business lawyer to help.
How Hunnicutt Law Group Can Help Form Your Texas Corporation
Our experienced business law team at Hunnicutt Law Group has decades of experience helping entrepreneurs form Texas corporations. We have strategies to help you throughout all stages of the growth cycle of your business. Contact us today to discuss your business needs. We are available through video conferencing, online, or by phone at (214) 361-6740.