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How to start a corporation in Texas

Comprehensive guide to form a corporation in Texas
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Category : > Articles Directory To Open A Corporation in The USA
Posted On : Sun Aug 14th,2016

Comprehensive guide to form a corporation in Texas

How to register a business name in Texas as a corporation?

What is a Texas corporation?

Corporation is a business entity where ownership is represented by shares of stock which are owned by the members, managed by a board of directors and administrated by the manager. The members or owners of the corporation are not personally liable for obligations and liabilities of the corporation.

What are the benefits to forming a Texas corporation?

The liability of a shareholder of the corporation is limited to the extent of their respective investment, so the creditors or lenders cannot pursue the personal assets of the shareholders to pay off debts of the corporation. Corporation structure also provides personal protection to the shareholders against the claims of employees or business partners. Corporations also provide tax savings and appeal to investors as the transfer of shares is very easy.

Steps to start a Business as a corporation in Texas

  • Choose and apply online to reserve the name for a corporation
  • Appoint a registered agent for a corporation
  • Appoint director/ directors
  • Decide the number of shares of stock
  • Decide the purpose of the corporation Prepare and Submit articles of incorporation
  • Prepare bye-laws of the corporation
  • Open a Bank account (optional)
  • Obtain a federal identification number or EIN
  • Obtain licenses and permit from the State
  • Satisfy zoning requirements and compliance with other local authorities
  • Comply with corporate annual report and franchise tax payments

Choosing the name for the Texas corporation

The name of the corporation must be distinguishable from the names of other corporation and other business entities already listed with the department of the state. Further, the name of the corporation contains one of the following words: Incorporated, Corporation or Limited, or one of the following abbreviations: Inc., Corp. or Ltd.

After choosing the name you may go for registration or name reservation with the Texas Secretary of State.

Who is the registered agent of the corporation in Texas?

The registered agent can be either a person or a commercial entity. The corporation cannot act as its own registered agent, but an officer of a corporation can be. Further, the consent of registered agent is mandatory either in written or electronically to be serve as an agent.

What is registered address of a Texas corporation?

The registered address must not be mailbox service or telephone answering service. It should be the complete street address located within the jurisdiction of Texas State where service of process may be personally served on registered agent during the normal business hours. It may differ from the principal place of the corporation.

Requirement of a director for the corporation in Texas

There should be at least one natural person as a director of the corporation along with his consent and street address. There is no residential requirement for the directors. You may appoint as many directors as per your requirement.

  • How to decide the structure of the authorized share capital?
  • There are two options available in the form. You have to select one
  • Option A—Par Value: “Par value” means the stated dollar amount assigned to a share.
  • Option B—No Par Value: Shares that are designated as having no par value may be issued for an amount of consideration determined by the board of directors.

How to define the purpose of the Texas corporation?

You may select any general legal purpose other than the purpose of nonprofit concerns, which should be sufficient but you may be specific by selecting other certain purposes such as health care, chemical operation, wood works etc.

Who is an Organizer?

An organizer may be any person having the capacity to contract for the person or for another; that is, a natural person 18 years of age or older, or a corporation or other legal entity. Only one organizer is required for the formation of a for-profit corporation and there are no residency requirements for an organizer.

Select effectiveness of filling

There are three options in the form, you have to select either A, B or C.

  • A certificate of formation becomes effective when filed by the secretary of state (option A).
  • The effectiveness of the instrument may be delayed to a date not more than ninety (90) days from the date the instrument is signed (option B).
  • The effectiveness of the instrument also may be delayed on the occurrence of a future event or fact, other than the passage of time (option C).

Who can sign the file the Texas certificate of incorporation form?

The organizer must sign the certificate of formation, but it does not need to be notarized.The organizer can sign it electronically.

How to file a Texas certification of incorporation form?

  • By mail - The form may be mailed to P.O. Box 13697, Austin, Texas 78711-3697
  • In person - The form may be delivered to the James Earl Rudder Office Building, 1019 Brazos, Austin, Texas 78701.
  • By fax - The form may be faxed to (512) 463-5709
  • Online – The form may be filed online through SOSDirect 24 hours a day, 7 days a week


How to draft bylaws of the corporation?

Bylaws should be clear and precise. You may draft from a legal consultant or CPA. Simply bye-laws include all about the internal process of the corporation you can draft bye-laws by including all internal policies and procedures. Bylaws are an internal corporate document. Bye-laws are not filed with the state.


How to obtain Employer identification number (EIN)?

You may apply with the registered agent for employer identification number (EIN) from IRS. IRS is the issuing authority of EIN. EIN is mandatory for corporations. You may also apply online through the official website of IRS.


How to obtain Texas licenses and permit for a corporation?

The official government page for the State of Texas provides specific information regarding permit, license and registration requirements through an extensive collection of links and contact information. The local government in your area, such as that of your city or county, may require specific permits and licenses. Each municipality may have its own unique.

Sale and Use tax for Texas corporations

Texas imposes a 6.25 percent state sales and uses tax on all retail sales, leases, and rentals of most goods, as well as taxable services. Local taxing jurisdictions (cities, counties, special purpose districts and transit authorities) can also impose up to 2 percent sales and use tax for a maximum combined rate of 8.25 percent.

Franchise Tax for Texas corporations

The Texas franchise tax is a privilege tax imposed on each taxable entity formed or organized in Texas or doing business in Texas.

How to convert a Texas corporation into an S corporation?

If the corporation wants to elect S corporation status for tax purposes, it must submit Form 2553 to internal revenue service (IRS).

How foreign corporation start a business in Texas?

All foreign corporations formed in any other State must register with the Texas Secretary of State to do business in Texas. They have to appoint registered agent for the service of process.

How to convert an LLC into a Corporation in Texas?

You can convert LLC into a corporation by following simple steps

  • file a certificate of conversion including a certificate of account status with the Secretary of State
  • file a certificate of formation with the Secretary of State; and
  • adopt a plan of conversion and file it with the Secretary of State
  • New Employer Identification Number will be issued

Moving a corporation in Texas from other state

  • The state of Texas does allow to move a corporation in the state of Texas to save or carry over the age of the existing corporation.
  • Existing Employer Identification Number can be used.
  • Existing corporation must be in a good standing in order to move company in the state of Texas.
  • Existing corporation will be dissolved after moving in the State of Texas.

How to file State Taxes?

State taxes are not applicable in the state of Texas.


MS Management Sciences, ACMA, APFA

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