As a Texas business owner, one of the first and most important decisions you’ll make is what kind of business entity your business should be.
For many business owners, forming a corporation makes the most sense.
As experienced Texas business attorneys, Massingill Attorneys & Counselors at Law have prepared this guide on what you need to know about how to form a corporation in Texas.
Benefits of Forming a Texas Corporation
Corporations are unique business structures. They provide you and your shareholders with limited liability for the company’s financial obligations.
In the event that something goes wrong with the business, having a corporate business structure can protect your personal assets from business creditors.
Forming a corporation can also protect you from legal liability from the actions others take on behalf of the business. Corporations also offer tax benefits and other legal benefits that are attractive to outside investors.
Requirements for Incorporating in Texas
Filing the Certificate of Formation
Forming a Texas corporation requires filing something called a “certificate of formation” with the Secretary of State. You also have to pay a small fee when you file. Your certificate will provide the state with a lot of key information about your business.
At a minimum, you’ll need to provide:
- Corporate name,
- Corporate organizers (names and addresses),
- Corporate directors (names and addresses),
- Registered agent and office,
- Corporate purpose,
- Stock structure, and
- Corporate duration (if not perpetual).
When you disclose your stock structure, you must state the total number of shares your corporation is initially authorized to issue. You’ll also need to disclose either the par value of the shares or that the shares have no par value.
If you are not sure what this means, corporate formation lawyers like our team at Massingill Attorneys & Counselors at Law are able to advise you on matters like this, as well as the many other issues of corporate formation.
Naming Your Corporation
What’s in a name? Well, everything! Your corporation’s name is your business’s identity. So when you create a corporation in Texas, you will also need to name it. You’ll need to check to see if the name you want for your corporation is available before filing formation paperwork.
You can also reserve a name for your corporation for 120 days by filing an application with the Secretary of State. In Texas, a business name needs to meet the following requirements to be a valid corporate name:
- Your name needs to contain the words “company,” “corporation,” “incorporated,” “limited,” or an abbreviation thereof;
- Your name cannot be deceptively similar to the name of another Texas entity; and
- Your name should not be not deceptively similar to a name that has already been reserved or registered with the Secretary of State.
If your corporate name is similar to someone else’s, you may not be approved to use it unless you obtain that entity’s written consent. Make sure to differentiate yourself when choosing a corporate name.
Choosing Corporate Organizers and Directors
An organizer, or an incorporator, files the incorporation documents for your Texas corporation. Their role in the company is short-lived.
As soon as your certificate of formation has been filed and your corporation is legally recognized by the state, your directors take over the management of the corporation.
However, it’s important to note that your organizers’ names and addresses will be on your certificate of formation when the company is first formed.
Corporate directors are the people actually responsible for managing the business and affairs of the corporation. They are the ones who exercise and delegate corporate powers.
There needs to be at least one director of a Texas corporation. Names and addresses of directors should be included on the certificate of formation. When creating your board of directors, it’s wise to discuss this process with an experienced Texas corporate formation lawyer.
A lawyer can guide you through best practices in including board qualifications in your corporate bylaws and other corporate governance tips.
Identifying a Registered Agent/Office
A registered agent receives documents and “service of process” on the corporation’s behalf. This means that the agent is available to receive legal papers, like a lawsuit. A registered office is where the agent can be found to receive legal documents.
Texas corporations need to have both a registered agent and a registered office. Sometimes business owners use a registered agent service. Other times, owners use their legal counsel as their registered agent.
Stating a Corporate Purpose
In Texas, you need to provide a description of your “corporate purpose” on your certificate of formation. However,
Texas law is very business-friendly when it comes to describing your purpose and allows you to provide a very general description of what your business does.
If you’re still struggling, our team of corporate formation attorneys can help.
Crafting Corporate Bylaws
Corporate bylaws establish the company’s processes, procedures, and ground rules for its shareholders, officers, and directors.
Texas doesn’t have any specific requirements of information that corporate bylaws must include, but the bylaws typically establish the way officers and directors are chosen. Bylaws also usually dictate the way meetings are held and the number and types of committees a corporation has.
If you’re ready to draw up your corporate bylaws, give our team at Massingill Attorneys & Counselors at Law a call. We’re experienced corporate governance experts who can help make Texas corporate bylaw drafting a breeze.
Benefits of Having Experienced Corporate Counsel
Forming a Texas corporation can help your business start off on the right footing for lasting success. Attorney Joshua Massingill and his team have extensive experience helping business owners like you form a corporation in Texas.
Contact us today to discuss how we can help you get started in building your Texas corporation.