You can accomplish the simultaneous goals of limited liability and pass-through
taxation by creating a limited liability company (LLC). Because an LLC offers its
owners the significant advantage of greater flexibility in allocating profits and
losses, and because LLCs aren't subject to the many restrictions of S corporations,
forming an LLC is often the better choice.
Choosing a business name is one
of the first steps in the process of forming your Texas Corporation. The name that
you choose:
- Must not
the same as, or similar or deceptively similar to, the name of any other registered
Texas business entity and any reserved names on record, subject to certain exceptions
under state law.
- May not contain
language stating or implying that it is organized for a purpose other than that
permitted by state law and its certificate of formation.
Texas corporation, in order of preference.
We will conduct a name check before filing to see which names are available.
In addition, the name must contain
one (or an abbreviation of) the following words:
- "Incorporated"
- "Corporation"
- "Company"
- "Limited"
Texas state law restricts the use of certain words and phrases
in business names.
Certificate of Formation:
To incorporate in Texas, a certificate of formation must be filed with the Texas
Secretary of State. The Texas Business Corporation Act requires that certain information
be included in your certificate of formation. The following is a summary of those
requirements:
Organizers:
- Minimum Number
of Organizers - One or more.
- Eligibility
Requirements - An organizer
must be a person having the capacity to contract for himself or herself or for another.
- Duties
- Signing the certificate of formation
- Listing Requirements
- The name and address of
each organizer must be listed.
Corporate Purpose(s):
Incorporating in
Texas can occur for any lawful business activity
- Listing Requirements
- The general business purpose is required to be listed in the certificate.
Director Information:
- Minimum Number
of Directors - One or more.
- Eligibility
Requirements - None. The
certificate of formation or bylaws may prescribe qualifications for directors.
- Listing Requirements
- Not required in the certificate
when incorporating in Texas
Other Required Listing Information:
- The type
of filing entity being formed;
- The number of shares that the corporation
is authorized to issue.
- The period
of duration of the corporation, if not perpetual; and
- The street
address of the initial registered office of the filing entity and the name of the
initial
registered agent of the filing entity at the
office.
Initial Capital:
In Texas,
a corporation may not commence business until it has received for the issuance of
its shares consideration of the value of one thousand dollars ($1,000). This requirement
must be stated in the certificate of incorporation.
Optional Provisions:
Texas permits optional provisions to be included in the
certificate of formation for corporations that wish to formalize additional requirements,
such as provisions managing the business and regulating the affairs of the corporation.
Bylaws:
A corporation maintains
its bylaws at its principal executive office and is not required to file them with
the state. The board of directors must adopt initial bylaws for the Texas incorporation.
Officer Information:
Officers must be elected by the
board of directors in accordance with the bylaws, and there must be at least
a president and a secretary.
Any officer may hold more than
one office in the corporation unless otherwise prohibited by law.
Registered agent:
Every Texas
corporation must have a registered agent in Texas
-- the person or office designated to receive official state correspondence and
notice if the corporation is "served" with a lawsuit.
- Eligibility
Requirements - The registered
agent in Texas must have a business office identical
to the registered office and must be either: (1) an individual residing in the state,
or (2) a business entity with authority to transact business in the state.
Registered office:
Texas requires that every corporation maintain a registered office
in the state. The registered office:
(1) must be located at a street address where process may be personally served on
the entity's registered agent, (2)
is not required to be a place of business of the filing entity or foreign filing
entity and (3) may not be solely a mailbox service or a telephone answering service.
Professional Corporations:
Under Texas
law, a professional corporation is formed in order to render services within one specific profession, subject
to certain state exceptions.
Professional corporations generally may not provide any other non-ancillary services
and must comply with particular conventions in its choice of corporate name.
Professionals that may form professional
corporations (rather than professional associations) include: accountants; acupuncturists;
athletic trainers; attorneys;chiropractors; nurses; optometrists; insurance agents;
and physical, occupational, respiratory care, and massage therapists. Doctors must
form professional associations.
Annual Report:
A report must be filed with the
Texas Comptroller before May 16th each year, except for the year of incorporation.
This report must indicate:
- The financial information of the corporation
necessary to compute the corporation's franchise tax;
- the name
and address of each officer and director of the corporation;
- the name
and address of the agent of the corporation; and
- Any
other information required by the
comptroller.
Other Reports:
A public information report must
be filed each year with the Texas Comptroller, which will then be forwarded to the
Secretary of State, that includes:
- The name
of each corporation in which the corporation filing the report owns a 10 percent
or greater interest and the percentage owned by the corporation;
- The name
of each corporation that owns a 10 percent or greater interest in the corporation
filing the report;
- The name,
title, and mailing address of each person who is an officer or director of the corporation
on the date the report is filed and the expiration date of each person's term as
an officer or director, if any;
- The name
and address of the agent of the corporation; and
- The address
of the corporation's principal office and principal place of business.
Taxes:
Texas does not collect personal or corporate income tax. However,
a corporation franchise tax is computed on both taxable capital and a taxable earned
surplus basis. A corporation pays on the basis that produces the greater tax. For
information on the Texas state taxes, including sales tax,
visit:
http://www.window.state.tx.us/m23taxes.html