Creating and maintaining a Texas corporation

The purpose of a corporation is to increase shareholder wealth. Corporations are a legal shield for shareholders that allows for limited liability. Creditors cannot pursue personal assets to satisfy the debt of a properly organized and maintained corporation.

How do you form a Texas corporation?

To form a Texas corporation, you must first choose a corporate name that is not deceptively similar to another business entity with the Texas Secretary of State. The name must include a designation of a corporation, like “Incorporated,” “Company,” “Corporation,” or “Limited.”

Filing corporation certificate with Texas Secretary of State

The next step is to file a certificate of formation with the Texas Secretary of State. The certificate must include the name of the corporation, a corporate agent’s name and address for process service; the appointment of the director of the company and their address; the shares the corporation is authorized to issue and whether the shares have a par value or no par value; the name and address of the organizer; and the effective date of the certificate.

Corporate bylaws in Texas

The third step is the preparation of the corporate bylaws. The bylaws set the internal affairs of the corporation. These internal operating rules show that your corporation is a legitimate business. Many banks, creditors, and the IRS will request a copy of your bylaws. But they are not required to be filed with the state. You should keep the bylaws and other corporate papers at the principal office of the corporation.

Organizational meeting for Texas corporation

Once those steps are complete, you must appoint the first directors and hold a meeting. At that meeting, it is time to select corporate officers, bylaws, bank accounts, issue stock, and set the fiscal year. You should also issue stock. Stock is usually granted to shareholders in return for money or services. Each shareholder’s name should be recorded in a stock ledger. Stock offerings to 35 or fewer people are generally exempt from state and federal securities filings. But you should get the advice of a business formation lawyer for guidance that applies to your situation. Corporate minutes must record what actions the officers and directors took at the meeting.

Corporate Taxes in the State of Texas

Once complete, you may obtain an employer identification number “EIN” from the IRS. If the directors chose to create an S corporation status for tax purposes, the corporation must submit IRS Form 2553 signed by all the shareholders. That IRS form must be filed within two months and fifteen days of the S corporation election. In Texas, a “franchise tax” is imposed on corporations that generate more than one million dollars. Whether or not you qualify for that tax, your corporation must file an annual return by May 15, even if no tax is due.

Texas Corporation Attorney

Forming a Texas corporation is a nuanced undertaking. It is helpful for you to have the guidance of an experienced business lawyer. Call a Dunnam & Dunnam attorney for a free consultation about the formation of a Texas corporation at 254-753-6437.