To form a corporation in Texas, you need to take the steps set forth below. To find out what’s required to form a corporation in any other state, see Nolo’s 50-State Guide to Forming a Corporation.
Your corporation's name must contain one of the following words: “Incorporated,” “Corporation,” “Company,” "Limited," or the abbreviation "Corp.," "Inc.," or "Co.," or "Ltd."
Your corporation's name must be distinguishable from the names of other business entities already on file with the Texas Secretary of State. Names may be checked for availability at the Texas Secretary of State SOSDirect website.
You may reserve a name for 120 days by filing a Name Reservation form with the Texas Secretary of State. The reservation may be filed online through the Texas Secretary of State SOSDirect website or by mail.
Your corporation is legally created by filing a Certificate of Formation For-Profit Corporation with the Texas Secretary of State. The certificate must include the corporate name; the name and address of the agent for service of process; the name and address of the initial directors; the number of shares the corporation is authorized to issue and whether they have a par value or no par value; the name and address of the organizer; and the effective date of the certificate.
The certificate may be filed online through the Texas Secretary of State SOSDirect website or it can be filed by mail. The filing fee is $300.
Every Texas corporation must have an agent for service of process in the state. This is an individual or corporation that agrees to accept legal papers on the corporation's behalf if it is sued. A registered agent may be an individual who resides in Texas, or a domestic or foreign business entity authorized to do business in Texas. The registered agent must have a physical street address in Texas. The agent should agree to accept service of process on your corporation's behalf prior to designation.
Bylaws are an internal corporate document that set out the basic ground rules for operating your corporation. They are not filed with the state. Your corporation is not legally required to have corporate bylaws, but you should adopt them because they establish your corporation's operating rules, and help show banks, creditors, the IRS, and others that your corporation is legitimate. For corporate bylaw forms, see Nolo’s website or Incorporate Your Business, by Anthony Mancuso (Nolo).
Keep your bylaws, meeting minutes, and other important corporate papers in a corporate records book. This can be a simple three ring binder or corporate records kit you order through a corporate kit supplier. Keep it at your corporation's principal office.
The incorporator—the person who signed the articles—must appoint the initial corporate directors who will serve on the board until the first annual meeting of shareholders (when the board members who will serve for the next term are elected by the shareholders). The incorporator must fill in an “Incorporator’s Statement” showing the names and addresses of the initial directors. The incorporator must sign the statement and place a copy in the corporate records book. The statement need not be filed with the state.
You should hold your first meeting of the corporation's board of directors to appoint corporate officers, adopt bylaws, select a corporate bank, authorize issuance of shares of stock, set the corporation's fiscal year, and adopt an official stock certificate form and corporate seal. The directors' actions must be recorded in corporate minutes prepared by the incorporator or any of the directors. Additionally, if the corporation will be an S corporation, the directors should approve the election of S corporation status. For a sample Incorporator's Statement and corporate meeting minute forms, see Nolo’s website or refer to Incorporate Your Business, by Anthony Mancuso (Nolo).
Issue stock to each shareholder in return for their capital contributions of cash, property, services, or all three. Small corporations usually issue paper stock certificates. Enter each shareholder's name and contact information in the corporation’s stock transfer ledger.
Texas gives corporations the option of establishing a par value for their stock or issuing no par value shares. Par value is a set amount below which the stock cannot be sold--it has nothing to do with the stock's actual value. See Nolo's article "What is Par Value Stock." If the shares are issued with no par value, "no par value" should be printed on the stock certificates.
A share of stock in your corporation is classified as a security under state and federal securities laws that regulate the offer and sale of corporate stock. However, federal law exempts private offerings: a non-advertised sale to a limited number of people (generally 35 or fewer). See Nolo's Corporations FAQ for more details.
Texas exempts from state registration unadvertised sales to no more than 35 shareholders who are either sophisticated investors, or individuals with a preexisting relationship with the corporation or its founders, principal shareholders, officers or directors. No Texas state securities filings are required for such exempt offerings. For more information, see the Texas State Securities Board Exemptions from Registration webpage.
Additional tax and regulatory requirements apply to your corporation. These include:
S Corporation Filing: If the corporation wants to elect S corporation status for tax purposes, it must submit Form 2553 Election by a Small Business Corporation (signed by all the shareholders). The election should be filed within two months and 15 days after the beginning of the corporation's first tax year. See the IRS S Corporation Fact Sheet for details.
Business Licenses: The State of Texas does not require a general business license. However, some types of businesses require state-wide licenses. For more informaiton, visit the Texas Department of Licensing and Regulation. You can also download the Texas Business Licenses & Permits Guide. Most Texas cities and counties do not require a local business license. Check with your city or county government website to determine your local requirements.
Texas Franchise Taxes: Texas imposes franchise taxes on corporations, but only those who earn well over $1 million. However, all Texas corporations should register with the Texas Comptroller of Public Accounts and file an annual return by May 15 of each year even if no tax is due. You can register online, by mail, or in person at a Comptroller field office.
All corporations organized outside of Texas must register with the Texas Secretary of State to do business in Texas. Foreign corporations must appoint a registered agent for service of process physically located in Texas.
To register, file Form 301, For-Profit Corporation Application for Registration. The application may be filed online through the Texas Secretary of State SOSDirect website, or it can be filed by mail. The filing fee is $750.
Before filing the application, make sure the corporation's name is available in Texas by checking the Texas business name database. If the name is not available, the foreign corporation must adopt an assumed name for use in Texas. The corporation must file an Assumed Name Certificate, Form 503 with the Secretary of State and pay a $25 filing fee.