How to start a Texas corporation

It might seem like a lot at first, but once you understand the steps, it’s very doable. This guide will walk you through everything you need to know to start your Texas corporation.

How to start a corporation in Texas

Incorporating means registering your business as a corporation so the law sees it as its own entity, separate from you. Each state has its own rules for how to do this, so the process can seem confusing. Let’s go through each step: 

1. Choose a name for your Texas corporation

Your corporation’s name should be unique and make a statement about your business. Make sure it complies with the following Texas requirements:

• Your name must end with "Corporation," "Corp.," "Incorporated," "Inc.," "Company," "Co.," "Limited," or "Ltd."
• You cannot use a deceptive name for your Texas corporation. For example, don't name your corporation "Noah's Ark Art Supplies" if your business is a home and garden store.
• Your name must be distinguishable from that of any other existing domestic or foreign corporation, name reservation, or registration filed with the Texas Secretary of State.
• The Secretary of State can tell you if the name you've chosen is available, but a final determination won't be made until your documentation is received and processed.

Need help coming up with a business name for your corporation? Try the Rocket Copilot™ AI Business Name Generator, a free tool to help you brainstorm business names and get started registering your corporation.

2. Decide between a Texas S-Corp and C-Corp tax designation

There are similarities between a Texas S-Corp and a C-Corp regarding personal liability, management, structure, and compliance. The differences, however, come down to the following:

• Ownership Rules: A C-Corp can have an unlimited number of shareholders and unlimited stock classes. An S-Corp is limited to a maximum number of shareholders, usually 100, and only one stock class.
• Taxes: A C-Corp is taxed on a separate basis. It files taxes at the corporate level, then shareholders may pay taxes on individual dividends they receive. S-Corps are "pass-through" entities. No taxes are paid at the corporate level, but owners pay taxes individually.
• Documents: A Texas S-Corp must file IRS Form 2553 to elect S-Corp status.

3. Appoint directors and shareholders for your Texas corporation

Each state has its own personnel requirements for incorporating. In Texas, you must follow these rules:

• Age requirement: Directors and incorporators must be at least 18 years old.
• Minimum number of directors: Single-officer or single-director corporations are OK in Texas. The same individual can hold more than one position. Texas law requires only one organizer for corporate formation.
• Residency: Corporate directors and organizers do not have to live in Texas. Directors are permitted to reside in foreign jurisdictions and to receive mail and notice there. The addresses of directors must be included in a corporation's Certificate of Formation. A business or post office box address can be used instead of a private residence.

4. Choose a Registered Agent

A Registered Agent is the person or business responsible for receiving tax, legal, and government documents during regular business hours. It's important that every business has one. You can either serve as your own registered agent (if you have a Texas address) or choose one to do that service for you (if you are not located in Texas or would like an extra layer of privacy).

5. File your Certificate of Formation with the state of Texas

Once you have a business name and registered agent, you can register your business as a Texas corporation with the state by filing your Certificate of Formation. This document may be referred to in other states as "Certificate of Organization," "Certificate of Filing," or "Articles of Organization."

Texas does not require that corporations file annual reports with the Secretary of State. However, corporations are subject to a state franchise tax assessment and must file annual franchise tax reports, which include a Public Information Report or PIR. Your PIR lists the names of officers and directors at the time of the report's filing.

6. Get an Employer Identification Number (EIN)

Before opening your doors for business, apply to the IRS for an employer identification number, or EIN. All corporations with employees in Texas must have an EIN. An EIN is similar to your Social Security number, but it's for businesses. You'll also need an EIN to open your corporate bank account.

Congratulations! After you have completed all these steps, you have formed your Texas corporation.

What to do after incorporating in Texas

Texas recommends that corporations create and maintain certain business records, such as Bylaws, as well as Minutes. We have more detailed information about Texas' requirements for Bylaws and Meeting Minutes. These documents can help protect your corporate status. Bylaws and Meeting Minutes also help shield owners, management, and organizers from personal liability for corporate activities and transactions.

Still have questions? Learn more about how to start your own business with Rocket Lawyer and get started today!
 

Key takeaways Starting a corporation in Texas means following state rules, like choosing a unique name, filling out paperwork, and paying fees to make it official. One important choice is deciding how your corporation will be taxed in Texas, either as an S-Corp or a C-Corp. This affects how the business and owners pay taxes, and the differences between the two change from state to state. After forming the corporation, it is recommended that you keep records – like Bylaws and Meeting Notes – to stay in good standing with the state and prove your business is real and operating correctly.

Additional resources

Learning how to enforce a contract is just one step. Explore these additional topics to learn more and take the next steps.

• What is a corporation?
• What is an S-corporation?
• How are corporations taxed?
• How to start a corporation
• How to register a corporation by state