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.
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.”
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.
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.
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.
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.
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.
Hunter Slocum is an associate attorney at Dunnam & Dunnam, L.L.P.
Carolina G. Truesdale graduated from Texas Tech University School of Law, Cum Laude, where she discovered her passion for serving families during difficult times.
Mason Dunnam won his first jury trial the day after becoming licensed to practice law. He became a lawyer to fight for the little guy.
Eleeza Johnson has been a member of Dunnam & Dunnam since 2015 and is currently designated as Of Counsel.
Andrea Michelle Mehta became a lawyer to help people navigate the legal world. She loves her work and the people.
Gerald Ray Villarrial has an important goal – to be remembered as someone who cared about people and changed lives through his skill as an attorney.
Jim Dunnam is a Board Certified Specialist in both Civil Trial Law and Family Law. Jim was born and has spent his entire life in Waco.
Merrilee Harmon is a Family Law specialist, Board Certified by the Texas Board of Legal Specialization since 1985.
Vance Dunnam has 60 years of experience as a lawyer in Waco, Texas, handling all types of cases in both the office and the courtroom.
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