The basics and benefits of a Texas corporation
A corporation is a separate legal entity that can shield its owners from personal liability and company debt. As a separate entity, the corporation can purchase real estate and other assets, enter into contracts, sue and be sued completely separately from its owners.
If you would like to incorporate in Texas (i.e. form a Texas corporation), we recommend reviewing the information below and comparing with the Texas LLC.
The Basics of a Texas Corporation
To incorporate in Texas, a certificate of formation must be filed with the Texas Secretary of State ($300 filing fee). In addition, you must have corporate bylaws, and an organizational meeting.
A Texas corporation is a legal entity with the characteristics of limited liability, centralization of management, perpetual duration, and ease of transferability of ownership interests. The owners of a corporation are called shareholders. The persons who manage the business and affairs of a corporation are called directors who are usually elected each year by the shareholders. The directors (aka the board of directors) appoint officers such as the president, secretary, treasurer and vice-presidents to handle the day-to-day operations of the corporation.
The Benefits of a Texas Corporation
The primary reason for forming a business is to obtain the personal liability protection for the owners of the business. The liability protection is a HUGE benefit, but there are many other benefits as well. In addition to the liability protection, the Texas corporation provides added credibility & professionalism, perpetual existence, tax savings…etc.
By default, a Texas corporation is taxed as a c-corporation. However, many small businesses file IRS Form 2553 (also known as an "s-election") and elect to be taxed as an s-corporation.