Should you form your corporation in Texas? We’ve collected the relevant information that will help you make this decision.
Pros
Large and wealthy population base
Business-friendly environment
Qualified workforce
Home to two of the top 20 metro areas in the US
Among top 10 "Best States for Business" (Forbes 2016)
Cons
Complex franchise tax structure
Competitive market
Cost of doing business
$300 filing fee / $0 annual statement
About 4.5% franchise tax
Privacy
Director names in annual report
Forming Your Corporation in Texas
The Name
Your official name will need to end with one of the following signifiers (or a relevant abbreviation): “incorporated”, “Company”, “limited” or “corporation.” In addition, it is required that the name of your business is not intentionally misleading to consumers, for any reason. Your company’s new name must also be completely unique, and not deceptively similar to any other organizations name or trademarks. There are also restrictions on using several terms that are common to the education, banking, or military industries. Do a FREE name search now.
Ownership
You will need to form an official board of directors when incorporating.
Required number of directors
Texas corporations must have at least one director listed in their incorporation documents.
Age restrictions
Directors of corporations located in Texas can be of any age.
Residence restrictions
There are no residency restrictions imposed on the directors of C corporations in Texas. However, S corporations are only allowed to have directors located in the United States.
What information needs to be included in the Certificate of Formation?
Texas does require the names and addresses of directors to be disclosed in incorporation documents.
Requirements for the Articles of Incorporation
The articles of incorporation is a document that must be filed to form your corporation. It must include:
Stock Information
Texas requires the number of initial shares outstanding, and their par value, to be disclosed during the incorporation process. The number of outstanding shares does not affect initial state filing fees.
Officer Information
The State of Texas does not require officer information to be disclosed during the filing process.
Registered Agent Information
All Texas corporations must have a registered agent on file and submit their name and physical Texas address (which cannot be a P.O. Box). This agent will be required to be accessible during standard business hours and acts as the state’s point of contact with the company. Learn more about registered agents in Texas.
Additional Texas Filing Requirements
Professional Practice
Professional service companies are permitted to form as PCs, or professional corporations, in Texas.
Initial Report Deadlines
All corporations in Texas must file an initial report within six months of incorporating. Learn more about Initial Reports.
Corporate Record-Keeping Requirements
Corporations are required to keep formal documentation regarding several of their operations including:
A complete and comprehensive set of financial documents.
Records that detail the owners (along with names and addresses), transfers, and class of all outstanding stock shares.
Meeting minutes for all shareholder and director meetings.
Texas Corporation Taxation and Fee Requirements
There are several tax and fee requirements that must be addressed by corporations in Texas. They are as follows:
Taxation
All states have complex taxation requirements. For more information regarding taxes in Texas, it is advised that you visit the state’s official business related website.
Annual Report Requirements
Corporations in Texas are subject to a complicated set of annual report and franchise tax requirements, which are determined by the organization’s start date. It is recommended that all corporations contact the Texas Comptroller’s Office of Public Accounts to determine what your new corporation will need to do to stay compliant. Learn more about annual reports.
Tax Identification Numbers
Texas requires an EIN (Employer Identification Number) for all corporations that will have employees, and most banks will require one to open accounts. Texas does not require corporations to obtain state tax ID numbers. Learn more about EINs.
Business License Requirements
The business licenses and permits required in Texas vary wildly depending on the county or municipality where your new corporation is located. If you would like to see more in-depth information on licenses and permits, please feel free to visit the content in our learning library that covers business licenses and permits.
Need a Texas LLC instead? We can help you form online!