How to Form a Corporation in Texas

If you're interested in forming a corporation in Texas, you need to follow several steps to legally create your business. You'll need to file formation paperwork with the state, draft internal corporate documents, and issue stock for your corporation, among other tasks discussed below.

You can also use our online corporation formation service, which will form a corporation for you with everything you need.

1. Choose a Corporate Name

Similar to other states, Texas has naming requirements for businesses, specifically corporations. In Texas, your corporation's name must contain one of the following terms or its abbreviation:

• "Company"
• "Corporation"
• "Incorporated," or
• "Limited."

(Tex. Bus. Org. Code § 5.054 (2024).)

In addition, your corporation's name can't include any words that would imply it's engaged in business activities that it's not actually engaged in. For example, your corporation can't be named "Alex's Auto Repair" if your business doesn't repair automobiles. (Tex. Bus. Org. Code § 5.052 (2024).)

Your corporation's name must also be distinguishable from the names of other businesses already on file with the Texas Secretary of State (SOS). (Tex. Bus. Org. Code § 5.053 (2024).)

You can search for available names either through:

• the Texas Comptroller of Public Accounts (CPA) taxable entity search, or
• SOSDirect.

You can reserve a name for 120 days by filing a Name Reservation form with the SOS. You can file the reservation online through SOSDirect or by mail. During the last 30 days of the name reservation, you can renew your name reservation. As of 2024, the filing fee for a name reservation is $40. (Tex. Bus. Org. Code §§ 5.101 and following (2024).)

2. Appoint a Registered Agent

Every Texas corporation must have an agent for service of process in the state (called a "registered agent"). A "registered agent" is a person or business that agrees to accept legal papers on the corporation's behalf if it's sued. The registered agent can be either an individual who resides in Texas or a business entity that's registered or authorized to do business in Texas. (Tex. Bus. Org. Code § 5.201 (2024).)

Prior to designating a person or business as your corporation's registered agent, you should make sure the agent agrees to accept service of process on your corporation's behalf. You'll indicate your registered agent on your corporation's certificate of formation.

3. File Certificate of Formation

Your corporation is legally created by filing a Certificate of Formation For-Profit Corporation (Form 201) with the SOS. This certificate is also called "articles of incorporation" in other states.

The certificate must include:

• the corporation's name
• the name and address of the corporation's registered agent
• the name and address of the initial directors
• the number of shares the corporation is authorized to issue and whether the shares have a par value or no par value
• the corporation's purpose
• the corporation's initial mailing address
• the name and address of the organizer, and
• the effective date of the certificate.

(Tex. Bus. Org. Code §§ 3.005 and following (2024).)

You can file the certificate online via SOSDirect or by mail. As of 2024, the filing fee for a Texas certificate of formation is $300.

4. Prepare Corporate Bylaws

Texas law requires the board of directors of a corporation to adopt initial bylaws for the company. The corporation's bylaws are meant to set out provisions for how the corporation will be regulated and maintained. You don't need to file your bylaws with the state. (Tex. Bus. Org. Code § 21.057 (2024).)

Typically, a corporation's bylaws will set out:

• the officer positions for the corporation (for instance, chief executive officer, chief operating officer, secretary, etc.)
• the rights and obligations of directors, officers, and shareholders
• the procedure for meetings of directors and shareholders
• the process for electing and appointing directors and officers, and
• how stock is issued.

Your corporation's bylaws will be important in establishing your business as a separate entity from its officers, directors, and shareholders—preventing others from piercing the corporate veil and holding individuals in the corporation liable for corporate debts. Bylaws are also useful in showing banks, creditors, the Internal Revenue Service (IRS), and others that your corporation is legitimate.

You should put your bylaws, meeting minutes, and other important corporate papers in a corporate records book. You can use a three-ring binder or you can order a special corporate records kit through a corporate kit supplier. Keep this book at your corporation's principal office.

5. Appoint Directors and Hold the First Meeting

In the certificate of formation, the incorporator (the person who signed the certificate) should have listed the corporation's initial directors. Texas law requires the directors to hold an organization meeting after the corporation's certificate of formation is filed. The organization meeting is held to adopt bylaws, elect officers, and attend to other corporate business. (Tex. Bus. Org. Code § 21.059 (2024).)

For instance, the board can decide other matters at the meeting such as:

• selecting a corporate bank
• authorizing the issuance of shares of stock
• setting the corporation's fiscal year, and
• adopting an official stock certificate form and corporate seal.

You should record the board's decisions and actions in corporate minutes. If you want your corporation to be taxed as an S corporation, the directors should approve the election of S corporation status at the first meeting as well.

The incorporator should also fill out an "Incorporator's Statement" showing the names and addresses of the initial directors. The incorporator should sign the statement and place a copy in the corporate records book. You don't need to file the statement with the state.

6. Issue Stock

After filing your certificate of formation and holding your first organization meeting, you should issue stock in return for capital contributions. This exchange is commonly memorialized in a shareholders' agreement (also called a "stockholders' agreement.)

Once a person or business has been issued stock, they become a shareholder (or "stockholder"). Shareholders can contribute cash, property, services, or all three.

Typically, small corporations will issue paper stock certificates. List each shareholder's name and contact information in the corporation's stock transfer ledger. Your certificate should have your corporation's name, the name of the person receiving the shares, and the number and class of shares being issued. One of the corporation's officers or directors should sign the certificate or the certificate should bear the corporate seal.

Texas Doesn't Require a Par Value for Stock

Texas gives corporations the option of issuing shares with or without a par value. A share's par value is its minimum legal value or the lowest price it can be sold for. (Tex. Bus. Org. Code § 3.007 (2024).)

If the shares are issued with no par value, "no par value" should be printed on the stock certificates. Otherwise, you should list the share's par value on the certificate.

Securities Laws and Exemptions

Typically, a share of stock in your corporation is classified as a security under state and federal securities laws. Securities laws require corporations to follow certain rules when offering and issuing stock, such as registering the sale with the U.S. Securities and Exchange Commission (SEC).

In general, the SEC is in charge of federal securities laws and the Texas State Securities Board regulates and enforces the Texas Securities Act.

Private offering exemption: Many small corporations don't have to worry about securities laws. Small corporations often make private offerings for their shares, and federal law exempts private offerings from being classified as securities. A "private offering" is a non-advertised sale to a limited number of people (generally 35 or fewer). You can see our corporations FAQ for more details.

Texas private offering exemption: The Texas Securities Act exempts from state registration unadvertised sales to no more than 35 shareholders. However, the shareholders must be either sophisticated investors or well-informed individuals with a preexisting relationship with the issuer (i.e. the corporation or its founders, principal shareholders, officers, or directors). No Texas state securities filings are required for such exempt offerings. For more details, see the Texas State Securities Board's Exemptions from Registration webpage.

7. File a Texas Franchise Public Information Report

After you form your corporation, you must file Form 05-102, Texas Franchise Public Information Report (PIR) every year. You must include the following information in your PIR:

• the name of any business your corporation has at least a 10% interest in (for example, a subsidiary of your corporation)
• the name of any business that has at least a 10% interest in your corporation
• the name, title, and mailing address of your corporation's officers and directors
• the name and address of your corporation's registered agent, and
• the address of your corporation's principal office and principal place of business.

(Tex. Tax Code § 171.203 (2024).)

Your report is due by May 15 every year.

You can file and pay your tax online using the CPA's eSystems/Webfile. You can also mail in your completed form to the CPA.

Find more details on the CPA's franchise tax overview webpage.

8. Obtain an EIN and Comply With Tax Requirements

Your corporation must obtain a federal employer identification number (EIN). You can apply for an EIN by completing an online application on the IRS website. There's no filing fee.

Texas franchise tax: Texas imposes a franchise tax on corporations formed in or doing business in the state. However, your corporation only needs to pay the franchise tax if its annualized total revenue exceeds a specific threshold. As of 2024, the threshold is $2.47 million.

Prior to 2024, corporations that owed no franchise tax had to file a No Tax Due Report. However, beginning in 2024, the No Tax Due Report is no longer required. Regardless of whether your corporation owes franchise tax, you must submit a PIR (discussed above). If required, you can either mail in your franchise tax report to the CPA or submit it online via eSystems. The report is due on May 15.

Texas sales and use tax: Your corporation must collect and pay sales tax to the CPA if you sell taxable goods or services in the state. To collect sales tax in Texas, you'll need to first get a sales tax permit from the CPA. You can apply for a permit online through the CPA's eSystems. (For more, visit the Texas sales and use tax FAQ webpage on the CPA website.)

No Texas wage withholding tax: Texas doesn't have a personal income tax. So, unlike many other states, you don't need to withhold employees' wages for this state tax.

Texas unemployment insurance (UI) tax. If your corporation has employees, you must file and pay the state UI tax every quarter. The Texas Workforce Commission (TWC) administers the state's UI tax. You can use the TWC's Unemployment Tax Services system to file your reports and pay taxes online. Check out the TWC website to learn more.

For more on starting a corporation, including sample forms and bylaws, you can read Incorporate Your Business, by Anthony Mancuso (Nolo).