Bryan corporate lawyer advises how to form a Texas corporation
If you are starting a business or presently operating a business as a sole proprietorship or a partnership, you may want to explore the possibility of incorporation. The corporate form of business offers many advantages and some disadvantages, so incorporating is a decision to be made with the guidance of your Bryan business attorney and accountant.
Benefits of incorporation
A corporation provides the benefit of limited liability, which means that your personal assets cannot be taken to satisfy the corporation's liabilities. A corporation also provides an easy way to transfer ownership interests, continuity through perpetual existence, a way to raise capital through issuance of stock, and credibility with lenders. However, it is more expensive to create and operate than a partnership, requires more recordkeeping and other organizational formality and subjects the corporation and shareholders to two levels of taxation.
A corporation is s separate person in the eyes of the law in Texas. Forming a corporation, therefore, requires the preparation of specified legal documents. Here we summarize important steps that must be taken in the process. A Bryan corporate lawyer can assist you with the details to make sure your corporation is properly established.
Certificate of Formation
A corporation's life begins with the filing of it Certificate of Formation along with a filing fee. This document must contain certain minimal provisions prescribed by law. In the case of a for-profit corporation these include the following:
- The corporation's name. The name must not be the same as any other corporation in the state and must include the words “Corporation,” “Incorporated,” “Limited,” or an abbreviation of these terms.
- Its registered agent for service (a person or firm that is officially authorized to be served with legal papers).
- The name of at least one person who is a director.
- The total number of shares that the corporation will have authority to issue. Different provisions apply depending on whether the shares have a par value or are no-par shares.
- A statement that the purpose of the corporation is the operation of a lawful business.
- The duration of the life of the corporation if it is other than perpetual.
- The name of the corporation's organizer.
- The effective date of the Certificate.
- Execution (signing) of the Certificate by the organizer.
The rules for the governance of the business, i.e., its bylaws, must be prepared. Bylaws typically contain rules for the election and service of the board of directors, the appointment of the business's officers (president, secretary, treasurer, etc.), the timing of meetings of the board and the shareholders, voting of the shares and proxies, compensation of officers and directors, indemnification, committees, corporate records, and more.
Shares must be issued. Depending on the number of shareholders, the dollar amount of the stock offering, the type of shareholders (well-healed or not, sophisticated or not), and the type of offering (public, private, intra-state, etc.), the shares may be required to be registered with the Texas Securities Registration Division and the U.S. Securities and Exchange Commission.
A federal tax identification number must be obtained from the Internal Revenue Service. A timely election to be an S corporation must be filed if this status is desired. Corporations are subject to a state franchise tax and must be registered accordingly.
Employers must register with the Texas Workforce Commission. Although there is no requirement for a general business license in the state, many types of businesses come under the jurisdiction of various government agencies and require permits and licenses.
Formation of a corporation in Texas involves significant legal requirements. As the standard form Certificate of Formation available on the Secretary of State's website notes: “The attached form is drafted to meet minimal statutory filing requirements pursuant to the relevant code provisions. This form and the information provided are not substitutes for the advice and services of an attorney and tax specialist.”
In Bryan-College Station, Texas, the Peterson Law Group provides the experience and services to assure your corporate business is established and operates in compliance with applicable law. Call us at 979-703-7014 to schedule a consultation or use our online contact form.
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