With its business-friendly climate and competitive tax advantages, Texas presents an unparalleled opportunity for entrepreneurs and business owners. As you consider the path to incorporation, the convenience and efficiency of online incorporation services streamline this crucial process, ensuring you can focus on what you do best – growing your business. Whether you’re a local startup or a company looking to expand into the dynamic Texas market, incorporating as a C corp online in Texas is a strategic decision that can unlock potential and pave the way for future prosperity.

Start setting up your Texas C corp now with MaxFilings- without any obligation. Save all of your incorporation information until you’re ready to incorporate.

Texas C corp taxation

Shareholders of a Texas C corp do not include the business’s income and expenses on their individual tax returns. Instead, the corporation itself files tax returns and pays income taxes, often at rates lower than those for individuals. Shareholders only report and pay personal income taxes on the money the corporation pays them. However, it’s important to note that shareholders must pay personal income taxes on dividends received from the corporation despite the corporation already paying taxes on its income. This situation is commonly known as “double taxation.”

Why form a Texas C corp?

Owners who prefer limited liability, a formal business structure, opportunities to lower overall income taxes, accumulating assets within the business, and facilitating capital raising often find Texas C corps ideal. You must file official documents with the state to establish a Texas C corp. MaxFilings can handle this process for you. 

Begin establishing your Texas C corp now.

Some points to consider when forming Texas C corp

• File official documents with Texas and pay state filing fees to form a Texas C corp.
• The law treats a Texas C corp as separate from its owners (shareholders).
• A Texas C corp can have an unlimited number of shareholders.
• Document and maintain minutes of shareholders’ and board of directors’ meetings.
• Certain limitations may apply to the types of business a Texas C corp can conduct.

Limited liability

• Shareholders of a Texas C corp usually have limited liability, risking only their investment in the corporation.
• Normally, shareholders are not liable for the corporation’s legal judgments, debts, or obligations.
• Protecting personal assets is key to business owners incorporating as a Texas C corp.
• Exceptions exist where shareholders may be held liable beyond limited liability protections.

Raising capital

• A Texas C corp can more easily raise capital by issuing and selling stock or other financial instruments.
• Selling stock may be regulated by Texas and federal securities laws.
• Ownership transfer is straightforward through the sale of corporation stock.

Taxation

• Texas C corps usually face fewer audits compared to sole proprietorships and partnerships.
• C corps in Texas file tax returns and pay income taxes at lower rates, allowing owners to accumulate more profits within the corporation.
• Shareholders of Texas C corps experience double taxation, paying personal income taxes on dividends received.
• Texas C corps can lower their owners’ self-employment taxes.

Owners & employees

• Owners working in a Texas C corp qualify for fringe benefits like group insurance, retirement and profit-sharing plans, and tax-favoured stock options and bonuses.
• Employees often prefer corporations that offer stock options and bonuses.
• A Texas C corp is perpetual and continues beyond the death of a shareholder, unlike some other business types.

Public perception

• The general public normally considers corporations more substantial than sole proprietorships and partnerships.

How to form a Texas C corp

To form a corporation in Texas, follow these steps:

1. Choose a corporate name: Your corporation’s name must include “Incorporated,” “Corporation,” “Company,” “Limited,” or abbreviations like “Corp.,” “Inc.,” or “Co.” Ensure the name is unique by checking with the Texas Secretary of State SOSDirect website. You can reserve a name for 120 days by filing a Name Reservation form online or by mail.
2. File certificate of formation: Legally create your corporation by filing a Certificate of Formation with the Texas Secretary of State. This includes the corporate name, service agent, initial directors, share details, organizer’s information, and effective date. File online or by mail with a $300 fee.
3. Appoint a registered agent: Choose an agent for service of process in Texas. This can be a Texas resident or a business entity authorized to operate in Texas with a physical Texas address. The agent must agree to accept legal papers on your corporation’s behalf.
4. Prepare corporate bylaws: Draft bylaws to outline your corporation’s operational guidelines. These internal documents are not filed with the state but are crucial for legitimacy and organization. Store these in a corporate records book at your principal office.
5. Appoint directors and hold first meeting: The incorporator must appoint initial directors who serve until the first shareholders’ meeting. Record this in an “Incorporator’s Statement” and keep it in the corporate records book. In the first board meeting, appoint officers, adopt bylaws, choose a bank, issue stock, set the fiscal year, and approve S corporation status if applicable.
6. Issue stock: Issue stock to shareholders in exchange for their contributions. Record shareholder details in the stock transfer ledger. Decide on par value for shares or issue them as no par value. Comply with federal and state securities laws regarding stock sales.
7. Obtain an EIN and pay taxes: Register for a federal employer identification number (EIN) online through the IRS website at no cost. For Texas Franchise Taxes, register with the Texas Comptroller of Public Accounts and file an annual return, even if no tax is due. This can be done online, by mail, or in person.