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Incorporate A Business In Texas FAQs

Incorporate A Business In Texas FAQs

Opening a business is an exciting, and often scary, time. The possibilities for success are endless, but so are the chances of failure. This is why it is so important to get your ducks in a row from the very beginning. 

While doing it all yourself is possible, the variables of the unknown may make it more challenging. 

The most crucial aspect of opening a business is that you really understand what you are getting yourself into. 

Is incorporating your business in Texas on your horizon? Then we want to help you truly comprehend the big picture down to the nitty-gritty details. 

There are many benefits to creating a legal entity for your business. Depending on the type of business you are envisioning and your goals, you can decide which legal entity to create.

What Does It Mean To Incorporate A Business In Texas?

When you incorporate a business in Texas, you are creating a separate legal entity that can live on forever. In the case of incorporation, the legal entity you’re creating is a corporation.

If done correctly, then the legal entity will protect you and your personal assets from liability. 

It’s a pretty interesting concept to realize that a corporation is much like a legal person. While corporations don’t cast votes, they certainly do pay taxes. 

However, it’s very important that business owners realize that incorporation is not just a formality. There are several steps to properly incorporating your business. If you don’t do it right, you’re doing yourself and your business a disservice. 

Furthermore, the corporate structure is an ongoing process throughout the life of the business. From annual reports to an annual meeting of shareholders along with corporate compliance, there’s a lot to cover. 

Simply put, you need to make sure you’re ready to cross the t’s and dot the i’s. 

Ready to incorporate your business the right way? Avoid unnecessary disputes in your future by contacting Carson Law today.

What Are The Benefits Of Incorporating A Business?

To start, you should know that the number of corporations in Texas is declining. This is partially due to the flexibility of LLCs, which is driving their popularity. 

However, many people still choose to incorporate their business for a couple of main reasons. If a franchise agreement requires a corporate structure, then that is your only option. Moreover, if you are looking to do an initial public offering (IPO), that is another common reason to incorporate a business. 

Like any legal entity you may choose to create for your business, the corporate veil is a big benefit.

To prevent a pierce in the corporate veil, the corporation needs to be both created and maintained properly. Additionally, there are steps every business needs to take to reap the benefits of their chosen legal entity. 

For instance, both a company and shareholder agreement will ensure there are no questions about how you will be operating your business. Clarity from the very beginning is always your best bet.

What Is The First Step To Incorporate A Business In Texas?

First of all, hire an attorney. Consult with your potential business partner(s), go over goals and expectations, and really research the legal entity options.

Then, you need to do a name availability check. If the name you were planning to use is already taken, you’ll need to go back to the drawing board.

Once you find a name that both works for your business and is available, then it’s time for the certificate of formation. Drafting and filing the certificate of formation (COF) with the Secretary of State is what will really get the process moving along. 

While you can do this on your own, it’s important to have an attorney review everything at every stage of the process. 

Is An Attorney Necessary In The Incorporation Process?

The short answer is no.

The state of Texas does not legally require a person to have an attorney involved with the incorporation process. In fact, the Secretary of State has all the forms and instructions on its website.

However, don’t expect the Secretary of State to hold your hand through this process. If the certificate is returned because it was not completed correctly, you’re on your own to figure out why.

While a lawyer can be very helpful and valuable in this part of the process, it’s not a requirement. But, a lawyer is very important in creating a legal entity that will protect you.

Before you bust out the champagne to celebrate incorporation, know that you’re not necessarily protected. 

There are several steps to creating a corporation properly. For instance, you must host an initial board meeting. If you miss that step or any others, you haven’t actually created a corporation. And if you skip these crucial steps, know that any contract could hold you personally liable. 

Don’t go into business ownership blind. Get the support and legal representation you need through Carson Law.

How Do I Incorporate My Business In Texas Properly?

To ensure you are incorporating your business properly every step of the way, you should really hire an attorney. 

It’s important to note that corporations are more burdensome than other structures – which is why other entities, such as LLCs, are more popular in Texas. 

Back to the point, first off – you should know that creating a corporation involves a lot of paperwork. There are meetings to organize and financial information to get together. If you’re not comfortable taking this on, then we really recommend that you take a step back.

If you are comfortable or insistent on moving forward despite your discomfort, a business partner may be a good move. 

When looking for a business partner, you should find someone who is comfortable taking on the details that aren’t your strong suit. Check out our previous blog, Business Partnership Mistakes To Avoid for insights on choosing the right partner for your business.

Furthermore, you must meet corporate compliance regulations. This may be one of the trickiest parts for someone who is unfamiliar with corporate compliance. However, you can bring on a company like Blue Meteor IT to ensure that your corporation is always in compliance.

Are There Benefits To Incorporating In Texas Versus Another State?

Each state has its own way of doing things. And there are specific rules in regulations in every state, which also vary by industry.

In Texas, you simply need a certificate of formation filed with the Secretary of State. Once you pay the filing fee and submit the COF, you can call your business a corporation. 

Several other states do have more robust reporting requirements, which makes Texas an attractive place to file. However, it is fairly difficult to have an anonymous corporation in Texas. 

In short, there are pros and cons with each state. Generally speaking, there aren’t any major differences. All in all, Texas tends to be very business-friendly with basic general expectations. As long as your revenue isn’t hitting a million dollars (as of 2021), then you’re not expected to pay franchise tax. 

Can I Move My Corporation To Texas?

If Texas is calling you south, then yes – you can move your corporation to the Lone Star State.

But first, make sure that this move is necessary. If your business is going to continue business in its state of origin, then you may not need to move the entire corporation. In situations where a corporation is going to begin doing business in Texas, but not moving, you would need to get a domestication.

However, if you are bidding farewell to your current state and wanting to continue business under the Texas sun, then a conversion is required.

It’s common to see people move their corporations from Delaware to Texas, and the process is fairly simple. Once the corporation is officially in Texas, the Delaware corporation officially closes. 

The benefits of conversion include only having one reporting structure, one reporting agent, and only needing to have a certificate with one Secretary of State.

Ready To Incorporate Your Business In Texas Properly With Carson Law?

Incorporation is a big step for your business, but you don’t need to go through the process alone. Carson Law provides legal representation to ensure that your business’ legal entity is created properly to help you avoid litigation or other unseen speed bumps down the road. 

Whether you are choosing to incorporate your business or choose a different legal entity, Carson Law is here to guide you. Reach out to Carson Law today to make sure your business is in good standing tomorrow and always.