How to Become Incorporated in Texas
If you're wondering how to become incorporated in Texas, there are steps you'll need to follow to receive corporation status in the state of Texas.3 min read
If you're wondering how to become incorporated in Texas, there are a number of steps you'll need to follow in order for your company to receive corporation status in the state of Texas. These include deciding on a business structure, coming up with a name, choosing who will manage the business, filing a certificate of formation, and requesting an EIN.
Types of Corporations
When becoming incorporated in Texas, there are three possible options. You can become incorporated as:
- A for-profit corporation.
- A nonprofit corporation.
- A foreign corporation.
Necessary Steps for Incorporating in Texas
The first step for becoming incorporated in the state of Texas is choosing the business structure that best fits your needs and goals. It is a complicated task, so the following steps should be taken when making a decision:
- Discuss the matter with an attorney. Due to this being a complex matter, talking to a lawyer will help clear things up regarding your corporation's expectations and the way you want to run it. The best way to find a qualified attorney is through recommendations. However, if that is not an option, searching through the state's bar association database should help you find the right person for the job.
- Make a decision regarding the way you want your corporation to function. Before starting the incorporation process, you should decide on things like how involved the shareholders should be in company decisions or if the future corporation will be for-profit or non-profit, among other important questions that need to be considered.
- Decide where you want to incorporate your business. A company doesn't need to be incorporated in Texas to do business within the state. You can incorporate in any state, and the laws of that state will govern your future corporation. If, however, you don't register in Texas but would like to do business in Texas, you must register as a foreign corporation.
- Determine how the corporation will handle the profits. A for-profit corporation distributes the profits to shareholders or employees as dividends or bonuses, while a nonprofit corporation uses them for reinvestments or charity work.
Creating a For-Profit Corporation
The first step in creating a for-profit corporation is naming it, as the law in Texas asks any corporation to have a business name. The name should then be registered with the Patent and Trademark Office, so it is protected against being used by others. The name must include one of these words
The name also must not be too similar to other businesses registered within the state of Texas.
Next, you will have to name the people in charge of managing the corporation, as the state requires all companies to have one or more directors. Also required is the appointment of a registered agent, which can either be an individual or an entity that is responsible for handling all official notices addressed to the corporation.
Once that is done, you will have to file a certificate of formation, clearly stating the corporation's purpose, value, name, and listing the people in charge. Once the document is prepared, it needs to be personally submitted or sent to the secretary of state along with a $300 filing fee.
Although not specifically required by the state, any corporation should have clearly defined bylaws, specifying the company's rules and procedures as well as the people in charge of enforcing them.
The final step is requesting an Employer Identification Number, also called a federal tax identification number, identifying the corporation for tax purposes. After that, the company is ready to do business, as long as it keeps detailed company records and complies with franchise, state, and federal taxes.
Creating a Nonprofit Corporation or a Foreign Corporation
The required steps for making a nonprofit corporation are similar to the process for a for-profit corporation, with a few distinctions. The purpose stated in the Certificate of Formation will be a charitable one, and a tax exemption application must be filed with the Internal Revenue Service so that the company is exempted from taxes that for-profit corporations need to pay.
If you'd like to register your corporation in a different state but also do business in Texas, you will have to register it as a foreign corporation. Registering it involves completing a form that contains the nature, purpose, and management structure of your corporation. This form needs to be filed with the Secretary of State along with a $750 fee.
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