Do you know why several corporate organizations call Texas a home for their business? Corporations like AT&T, Southwest Airlines, and Exxon Mobil choose Texas for their thriving global organization for a reason. It is obvious that companies know the detailed processes and are well-informed about Texas. You should also be well-informed about the details if you’re planning to incorporate in Texas.
The details include simple things, like how to turn a profit and start a C-Corp in Texas. On top of that, learn about the different options first and evaluate what your priorities are. Follow our step-by-step guide or let FastCorpUSA handle the paperwork on your behalf!
Why File Your C-Corp in Texas?
You should know some straight interesting facts about Texas. The Texas ranking says it all. It is ranked as the best state to start a business for two years. According to WalletHub, Texas state is the fifth highest among all states for spending amount on business initiatives. WalletHub is a company that conducts this state-specific research. The government-supported programs and funds initiatives act as the cherry on top. The programs support an educated pool of workers especially small businesses in Texas. The growth rate of such businesses is almost 11% which is incredible if we compare it to last year’s statistics.
The tax system of the US becomes beneficial for you if your C-Corp is based in Texas. One of the best advantages for your C-Corp is the limited liability protection. Corporate shareholders will not be personally responsible for the company’s debts. The assets will also not be affected if there is ever an unfavorable judgment in a lawsuit against your C-Corporation. In general, only a shareholder will be liable for any investment in the company. Then, there is an advantage of raising capital much more easily in Texas for any business entity in Texas. The corporation has an option of selling stock if it ever needs to raise funds. Corporations can also elect to S-Corps to eliminate double taxation. Texas will offer you a streamlined process in all possible ways.
Starting a Texas C-Corp Guidelines
Starting a C-Corp in Texas can cost you around $300 and you can process the application online to the state secretary website. The process can take 1-2 business days to complete.
Here are some steps to forming a C-Corp in Texas!
Search Your C-Corp Name
We bring you everything you need to know about your C-Corp name in Texas. It includes all trademarks, general rules, and assumed names.
The general rules apply to all states such as choosing a unique name. You need to perform a Texas Secretary of State corporation search before you begin your C-Corp paperwork. When choosing a name in Texas, make sure it doesn’t involve or indicate a purpose that conflicts with the purpose. You are also not allowed to use any of the following features to differentiate your Texas C-Corp name from any other business in the state.
- Definite articles such as ‘an’, ‘the’, or ‘a’
- Suffixes such as Company, Incorporation, Corporation, Corp, Limited, ‘Inc’ etc
- The conjunction ‘&’ or ‘and’
- Punctuation, abbreviations or symbols, typefaces or fonts
To form your corporation, you must file a Certificate of Formation with the Texas Secretary of State. This document will need to include several pieces of information about your incorporation. Unlike in other states, Texas does not require that you disclose the names or addresses of company officers in your formation documents. This is one of the biggest advantages of incorporating a business in this state.
Some states will not allow you to incorporate names that use any terms that are trademarked for the International Olympic Committee. Moreover, you can’t use the name with the name of any federal organization or agency such as Texas Rangers, Texas Workforce Commission, FBI, etc. Do not imply any purpose with your business name that would be illegal to carry out later.
An ideal business name will always be difficult to find. It should be something that appeals to customers, and best represent your service or products. It should be memorable enough to stand out. The state’s online portal can help you to find such a name.
Texas Registered Agents
A registered agent in Texas is responsible for providing various services such as accepting formal documents from the TX Secretary of State. You need to designate a registered agent service for all the times once you appoint them. There is no period during which your business is without a registered agent, therefore you always need an agent. You can also replace your existing agent after formation. Getting a registered agent is a legal demand by the Texas BOC (Business Organization Code).
A registered agent could be anyone with a small caveat. It must have a physical address but not a P.O. box. A member of the C-Corp can also be an agent. The information regarding the agent must be available publicly to all. A Texas registered agent’s responsibilities are not only limited to receiving documents but also to state and federal government correspondence and notices. This also includes receiving tax forms or requesting completing permits, filings, and reports. This is a reason many corporations opt for third-party registered agents.
If You Don’t Have A Registered Agent:
There are severe consequences of not having a registered agent for your business. You may be subjected to certain ramifications. The secretary of the TX state may sue or serve you a notice and you probably won’t know about it. If your corporation is sued and you don’t know about it, you could lose a default judgment in your absence. The penalty is not limited to this only. In the most severe situation, you can lose your status as a corporation in the state. The evidence of your C-Corp is in the form of a registered agent. Without it, you could lose your business entity protections and your corporation may be dissolved. Overall, you can fall out from the good standing status of the Texas secretary of state. If you don’t respond, you can lose the business rights forever.
Texas Articles Of Incorporation
The TX state wants you to file Articles of Incorporation. These can be filed by mail or online The information is basically required by the Texas state and includes business name, mailing address, business address, the effective date of the corporation, registered agent name or corporation, and the signature of an authorized representative. The form 806 is used for Texas filing fees.
Creating Corporate Bylaws In Texas
The corporate bylaws are the detailed set of rules adopted by the board of directors once the corporation is formed. These bylaws specify the corporation’s internal management structure. The founders or directors of the corporation typically draft them and not submit them to the state. These are strongly recommended due to obvious reasons. First, your C-Corp can maintain consistency in the way it operates and communicates its organizational rules in the state. Second, these bylaws offer a summary of duties to everyone and details about ownership rights, annual meetings, and the removal or addition of any director or officer.
Appoint Your C-Corp Directors In Texas
Shareholders elect the board of directors of a corporation. This is done by creating the statement of incorporator which will list all the names and addresses of the board of directors in Texas. The statement is then signed by all the incorporators. The official control is then passed on to the initial directors. According to the Texas corporate laws, c-corps at least to have one president and one secretary. However, a single person can be all in all such as the director, shareholder, secretary, and president. The overall statement is then made as a part of the corporate record.
Authorize The Stock Issuance
Stock represents the ownership in your corporation. You purchase stock in small pieces for your business. It is also very common for most corporations to issue paper stock certificates to shareholders but it’s not a legal requirement. The stock issuance is important for raising business capital and keeps it separate from the owner’s money. You can set the value of each stock in a private company that is not publicly traded on the stock market. For example, one share could be $100 or $10,000 and that’s completely acceptable. The sale of stock or issuance must be legally certified through the certificate of formation. The C-Corp cannot sell more sales than the authorized ones.
Hold Annual General Meetings
Texas differs from all other states in this one aspect. It is generally a good idea to hold an annual general meeting as this is also a process requirement. However, in case you don’t hold a general meeting, your corporation will not be terminated or dissolved. The Texas BOC clearly states that.
Obtain a Texas Business License Or Permit
This is an utmost requirement as most businesses in Texas require a combination of licenses and permits at the agency and federal levels. The SBA outlined a detailed process for applying for Texas licenses and permits. You can look into all types of business licenses you may need to file within the Texas state.
Texas Filing Fees And Requirements For C-Corps
There are two types of fee requirements for C-Corps in Texas. One is legal business registration and the other is keeping your business in good standing. This all involves necessary investment or expenses. Some cost is directly payable to the Secretary of the TX state. The other additional charges are reported to the federal government. Some of the common requirements and fees include state fees and corporation taxes. The state fee is almost $300 along with the filing time of 4 weeks. This is payable once you are done with the incorporation paperwork.
Employer Identification Number In Texas
It is a nine-digit number that is issued by the IRS. There is a unique EIN for every corporation in the country. You will use it for every official and legal purpose in Texas such as for opening a business bank account or paying taxes and employees. You can obtain an EIN directly from the IRS or FastCorpUSA will get one for you. The IRS Form SS-4 will be used to complete an EIN application.
Amending C-Corp Facts In Texas
The Texas state secretary fills out every information required for incorporation in the state at the time of incorporation. Throughout the years, you can amend some of the information. You’ll need to file the certificate of amendment with the TX state secretary. The filing fee for the certificate will be around $150 and you can take our help or do this by yourself. You need to file this certificate when you add, remove, or change the company’s director, company name, the registered agent, the other facet of the business, or the number of shares the company authorized to issue.
C-Corp Taxes In TX
There are two types of taxes that C-Corps must pay in Texas state, sales tax, and franchise tax. You may also need to pay use tax depending upon the business need or use. There are no income taxes as Texas is one of the nine states that is exempted from income taxes. Sales and use tax are similar enough. The franchise tax is imposed on certain businesses for the right to exist as a legal entity. This tax is also an essential part of filing taxes for the corporations.
Now you have everything in accordance with your plan and budget, it’s time to open new horizons to business. The formation of business within the Texas state is only the beginning. There is plenty to do after that such as marketing your product and paying employees. Stepping into Texas can be highly rewarding to you but only if you plan efficiently. Make sure all the administrative tasks are carried out efficiently or you can reach out to us at firstname.lastname@example.org.