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Why Incorporate in Texas?

Considered one of the most business-friendly states in the nation, Texas offers several business and tax incentives, provided your corporation meets certain criteria.

For example, the Texas Enterprise Fund (TEF) awards “deal-closing” grants to companies considering a new project in Texas and other out-of-state sites. The company must be well established, financially sound and must operate in an advanced industry that affords it other feasible location options nationally and/or internationally.

For most entrepreneurs looking to start a larger business, creating a Texas corporation may be the best choice. As a corporation, your business is able to buy and trade stock, and when it comes to excess profits, corporations offer more flexibility than a limited liability company (LLC). A corporation is allowed to pass income and losses to its shareholders, who report taxes on an individual tax return at ordinary levels.

Is an LLC Better Than a Corporation?

It all depends on your goals. Limited liability companies are usually better for smaller businesses. An LLC is easier to set up, and you receive many of the same benefits as a corporation, but with less regulation.

Learn more about forming a Texas LLC so you can decide which business entity is right for you.

Benefits of Forming a Texas C Corp

  • The strongest form of liability protection possible by insulating your personal assets and finances from business debts, obligations, damages, bankruptcy or other liabilities
  • Several options to create, buy, sell or transfer stock, including publicly
  • The ability to issue more than one type of stock
  • The ability to sell stock to investors inside and outside the U.S.
  • The ability to raise more funds by issuing more stock

Benefits of Forming a Texas S Corp

It offers several advantages similar to those provided by a C Corp including, but not limited to:

  • Options for creating, transferring and selling stock, though not as many as a C Corp
  • The capacity for up to 100 shareholders
  • Simpler rules than those applicable to C Corporations
  • Easy transfer of ownership simply by selling your stock
  • The possibility of saving money by allowing you to pay less self-employment tax

In this guide, you’ll find information on naming your corporation, getting a Registered Agent, the fees you’ll need to pay, business taxes and much more. We also cover what you'll need to register your corporation and how you'll interact with the TX Secretary of State.

Start a Business in Texas Checklist

To help you along the way, use our Starting a Business checklist to keep track of everything you need to do to get your business up and running.

 

How to Form a Texas Corporation Yourself in 6 Steps

1

Choose a Unique Business Name and Complete a State Business Search

Every Texas business must have a unique name that hasn't already been claimed by another business in the state. If you’re having trouble coming up with a name, try using our Business Name Generator to gather ideas. You'll need to follow a few naming rules, which you can read about in detail on the Texas Corporation Names page.

Once you’ve chosen a name, you’ll need to make sure it’s available in Texas. To learn whether another company in the state is using your desired business name, use our tool to do a Texas entity search.

You can also carry out a name search on the TX Secretary of State website. You'll need to log in to the state's online portal to take advantage of this service.

We can check Texas corporation name availability for you

2

Provide an Official Address for your Corporation

Every Texas corporation must have a designated address. That could be your home address (if you’re running the company from your residence), a building where your office is located or any physical address of your preference. The address can be outside the state of Texas and can be a P.O. Box.

You may also be able to use a virtual mailbox for your business address. Incfile can provide you with a Texas virtual mailbox where we'll receive your mail, and scan it for your online review. This can be especially convenient if you run a home-based business and don't want your home address published as part of your business public record.

3

Assign an Registered Agent

Someone who receives official correspondence and is responsible for filing reports with the Secretary of State is known as a Registered Agent. Every Texas corporation is required to have a Registered Agent.

You can fill this position, assign another manager in your business or use a Registered Agent service. If your Registered Agent in Texas is a person, they must have a physical street address in Texas and must be present during business hours to receive important documents on behalf of your company.

You'll appoint your Registered Agent when you file your Texas Certificate of Formation to create your business, and they must formally accept the appointment by filing an Acceptance of Appointment and Consent to Serve as Registered Agent form with the Secretary of State.

All of Incfile’s business formation packages include Registered Agent service. It’s free for the first year and just $119 per year after that. You can also access a digital dashboard to view any document we've received on your behalf.

4

File Your Certificate of Formation with the TX Secretary of State

Once you've gathered all the information for your corporation, you’ll need to file a form with the Secretary of State to receive your Texas Certificate of Formation. This will officially create your business.

Here’s what is typically included:

  • Your business name and type
  • Registered Agent's name and address
  • Names and addresses of directors
  • The corporation’s capital structure (number of shares to be issued, who owns them, pricing, etc.)
  • Your corporation's purpose, which is the Texas default "for the transaction of any and all lawful business for which a for-profit corporation may be organized" under Texas code
  • The organizer's name and address

Your Certificate of Formation can be filed online via the state's digital portal for an additional $5 fee. You can also mail or fax the form to the Office of the Secretary of State, or Incfile can file it on your behalf. The Texas corporation filing fee is $300.

File by Mail

Secretary of State
P.O. Box 13697
Austin, TX 78711-3697

Submit in Person

James Earl Rudder Office Building
1019 Brazos
Austin, TX 78701

Fax

(512) 463-5709

You only need to file your Texas Certificate of Formation once, but every year after, you'll also need to report and pay TX franchise tax (if applicable to your business) and file a public information report. Incfile can remind you about this every year, or we can do it for you if you have us handle the paperwork.

Let Incfile handle all the Texas corporation formation paperwork for You for $0 + the state fee

What are the fees and requirements to incorporate in Texas?

State Fee State Filing Time Expedited Filing Time
$300 5 Weeks 9 Business Days
State Fee $300
State Filing Time 5 Weeks
Expedited Filing Time 9 Business Days

Public Information & Franchise Tax Report

Frequency

Annually

Due Date

Both reports are due between January 1st and no later than May 15th.

Filing Fee

There is no charge for the Public Information Report. The Franchise Tax Fee is based on the revenue of the Corporation.

5

Get an Employer Identification Number (EIN) from the Internal Revenue Service

You'll need an EIN to identify your business to the IRS. You use this number when filing and paying taxes, when submitting payroll information and payments for your employees and for opening a business bank account. You can obtain one directly from the IRS, or Incfile can get one for you as part of the Texas corporation formation process.

6

Write Bylaws

A set of rules that govern how a corporation will be run, bylaws detail how many directors the corporation will have, whether the board of directors will have annual meetings and
what the voting requirements are, among other things.

Some states require companies to create bylaws. You're not legally required to have them in Texas, but it’s a good idea to write them to protect your business from any future changes and events.

Texas Corporation Types

C Corporation

When you file to start a corporation, by default, it's a C Corp. This is the choice for large businesses that will trade shares in the stock market.

A Texas C Corp will offer you several liability protections, but it will also be required to adhere to numerous strict rules and regulations. It will also likely have a substantial amount of administrative overhead and won't enjoy as many tax advantages as other corporation types.

Learn more about C Corporations.

S Corporation

Technically, an S Corporation isn't a business entity the way LLCs and C Corporations are. It's a tax filing status. An LLC or a C Corporation can be an S Corporation. It's just a matter of filing a form with the IRS.

The main reason to file as an S Corp is to save money on self-employment taxes. To get an idea of how much money you might save, use our S Corp Tax Calculator.

If you want your business to be treated as a Texas S Corp, file the IRS Election by a Small Business Corporation form, also known as Form 2553 or an S Corp Election form.

Consult with your tax advisor or accountant to determine whether this is your best option.

Learn more about S Corporations.

Compare S Corp vs. C Corp to learn the benefits and drawbacks of both, and decide which one will best suit your needs.

Professional Corporation

Some states, including Texas, allow certain occupations to form Professional Corporations. The state's Business Organizations Code defines this as:

"... a corporation organized under the Act for the sole and specific purpose of rendering a professional service. ‘Professional service’ is defined as any type of personal service that requires, prior to rendering such service, the obtaining of a license in Texas."

However, not all licensed professions are permitted to form Professional Corporations. Per Texas BOC, Title 7, Chapter 301, § 301.003, a few of the professions permitted to form a Texas Professional Corporation include, but may not be limited to:

  • Architects
  • Attorneys
  • Certified public accountant
  • Dentists
  • Physicians
  • Veterinarians

Check with the TX Secretary of State to confirm whether your business should and can be a Professional Corporation.

Close Corporation

Put simply, a Close Corporation is one that has a limited number of shareholders, and isn't publicly traded.

Usually, Close Corporations are exempt from corporate requirements, such as having a board of directors and holding annual meetings. Per Texas BOC Title 2, Chapter 21, Subchapter O, § 21.701, a Texas Close Corporation can be managed according to a shareholders' agreement rather than by a board of directors or bylaws.

This entity is often chosen by family-owned businesses to prevent non-family members from establishing or claiming any ownership of the company.

Foreign Corporation

If your business operates in another state and you want to expand into Texas — or vice versa — you’ll need to form a Foreign Corporation.

Learn more about Texas Foreign Corporation registration.

Nonprofit Corporation

Charitable organizations can incorporate as nonprofit corporations. This means all the profits they generate are donated to the organization supported by the charity, minus administrative costs.

A nonprofit corporation is also exempt from federal and state taxes, allowing more of the profit to benefit the charity.

Note: Everything in this guide applies to for-profit corporations, and mostly to C Corps and S Corps. Items listed as requirements for forming a corporation may or may not also apply to nonprofits.

Limited Liability Company

Depending on the kind of business you want to start, or your personal circumstances and goals, an LLC may be a better option. For example, you may not need the options to buy and sell stock. Or you may simply want to build a small business with a few employees or even just yourself.

A Texas LLC is usually a better option for a smaller business. It's easier to set up, but it still offers you certain advantages you'd get from a corporation. You can even have your LLC treated as an S Corporation for tax purposes to save you money.

Regardless of which direction you decide to go, we can help you with your Texas business registration. Learn more about limited liability companies.

Sole Proprietorship or Partnership

These are the simplest types of businesses to set up. That's because there's no real setup to do. If you don't choose to form a separate business entity, by default, you'll have either a sole proprietorship (just you) or a partnership (you and one or more other people).

Neither of these options provide you with any special benefits or liability protections and can leave your personal assets vulnerable. For these reasons, we don't recommend them.

Compare business entity types to decide which one is best for you.

Helpful Resources from the State of Texas

More Information in This Guide

You’ll find plenty more insight and guidance on the other pages of this guide, including:

Texas Corporation Names

How to search the state business registry and find the right name. Includes information on naming rules, assumed names, reserving a corporation name and more.

Texas Registered Agents

How to appoint, change and search for Registered Agents. Also includes the duties they fulfill and the rules they’re required to follow.

Texas Incorporation Fees

Details the various fees you’ll need to pay, as well as the state and federal requirements you’ll need to meet. Includes details about Employer Identification Numbers (EINs), state and federal business licenses, public information reports and more.

Texas Corporation Taxes

Covers the various taxes you’ll have to pay to the state and federal governments. Includes details about state taxes such as sales and franchise, and federal taxes such as income and self-employment.

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