What You Should Know Before Incorporating In Texas

A corporation is one of the structures of business that one can establish in the Texas state. This setup provides shareholders with limited liability for the corporation’s financial obligations. That implies that creditors cannot pursue the owner’s personal assets to pay the corporation’s debts and obligations. Moreover, forming a corporation can also protect an entrepreneur from liability for employees’ or business partners’ actions. Such are not the only benefits of forming a corporation.  There are additional benefits such as potential tax savings and increased appeal to investors. Before forming a corporation, it is prudent to understand the requirements put across by Texas State.

Prepare Your Certificate of Formation

Forming a Texas corporation requires one to file a certificate of formation with the Secretary of State. One must pay a filing fee. The corporation’s existence begins from the time of filing the certificate of formation unless the certificate specifies a different date. Notably, the certificate of formation may include many provisions but must contain the following.

  • Name of the corporation under formation

  • Names and addresses of organizers of the corporation

  • Names and addresses of directors of the corporation

  • Registered agent and registered office location of the corporation

  • Corporate purpose of the corporation

  • Stock structure of the corporation

  • Duration of the corporation (if not continual)

Naming Your Corporation

Before filing the certificate of formation, it is essential to check the availability of the name you want for your corporation. One can do this by calling or emailing the Secretary of State’s office. Alternatively, one can also reserve a name for 120 days by filing an application with the Secretary of State. Besides, one may renew the reservation of a corporation name for additional 120-day periods.

According to the Secretary of State’s office, the corporation’s name must meet the following requirements:

  • The name must contain either of the words “company,” “corporation,” “incorporated” or “limited,” or an abbreviation of one of those words.

  • The name should not be the same as or deceptively similar to the name of another Texas entity. In addition, there should be no prior reservation or registration of a similar name with the Secretary of State.

Specifying Organizers

Sometimes, experts refer to an organizer as an incorporator. The organizer is the person who files the incorporation documents. After filing the certificate of formation, the directors take over management of the corporation and the organizers have no further responsibilities.

When specifying organizers, one must meet the following requirements:

  • One must list each organizer’s name and address on the certificate of formation.

  • There can be one or more organizers during incorporation.

  • An organizer should be an individual aged 18 or older, a corporation, or other legal entity in the US. Noticeably, an organizer does not have to live in Texas.

Specifying Directors

Directors are solely responsible for handling the business and affairs of the corporation as well as exercising corporate powers. Nonetheless, directors may delegate some of these responsibilities to the appointed officers or to committees. It is necessary to meet the following requirements when specifying the corporation’s directors.

  • One must include the names and address of directors in the certificate of formation.

  • There must be at least one director and a provision for the upper limit on the number of directors.

  • There should be no age or residency requirements for directors. However, the bylaws or certificate of formation may describe qualifications for directors.

Stating a Corporate Purpose

Texas law allows a business owner to provide a general description of the corporation’s purpose. That gives the greatest possible flexibility in operating a corporation, and one of many advantages of incorporating in Texas State uses this general language in its certificate of formation form. A clause states, “The purpose for which the corporation is formed is for the transaction of any and all lawful business for which a for-profit corporation may be organized under the Texas Business Organizations Code.”

Determining Incorporation Bylaws

The bylaws of a corporation establish operating rules and procedures that the directors, officers, and shareholders will follow. A corporation’s bylaws do not have to include any particular items. Nevertheless, they provide for selection of officers and directors, the way meetings are held. The bylaws also provide for the types of committees the corporation will have. Bylaws are not filed with the Secretary of State and should be kept on file at the business premises.

When determining your corporation’s bylaws, one must meet the following requirements:

  • After filing the certificate of formation, the initial directors must meet to approve bylaws during the first meeting of the directors.

  • Bylaws should not consist of anything that is inconsistent with Texas law or the certificate of formation.

Are you ready to start a corporation in Texas? Mount Bonnell Advisors can help you start a corporation online and find a registered agent in Texas.

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