Incorporation in Texas is governed by the Business Organizations Code of Texas Revised Civil Statutes. Under this code, a Texas Corporation is a legal entity formed under state law through filing articles of incorporation with the Texas Secretary of State’s Office and meeting other statutory requirements.
Unlike partnerships, which are not separate legal business entities under state law, shareholders in corporations enjoy limited liability protection (only losing the money they’ve invested in their shares if more than that damages are awarded to creditors).
Certificate of Incorporation Features
Certificate of Incorporation is prepared by a Texas company formation agent and filed with the Secretary of State’s Office.
The following information is required:
- The name of the Corporation
- The county in which its principal office (or, if none in this state, its registered office) is to be located
- The number of shares the corporation is authorized to issue; and
- Whether or not the shares are to be issued as certificated shares or as uncertificated shares. If uncertificated shares are issued, no person shall subscribe for more than ten percent (10%) of the corporation’s authorized stock. No provision that has the purpose or effect of disqualifying security or interest from state statutory exemptions is enforceable with respect to that security or interest.
Article 1: The Company Name
Articles of Incorporation must clearly state the business’s name. A business name must comply with Texas Business Organizations Code section 3.151.
Article 2: The Registered Agent
Under the Organizations Code, a company must maintain a “registered agent” in the state. A registered agent is an individual or corporation that agrees to accept official legal documents (and other information) on behalf of the company. The registered agent must be available during all normal business hours at the address provided with the filing.
Article 3: The Directors of the Corporation
A corporation must have at least one director. A person may act as a director without being an incorporator. The directors of the corporation are elected by the shareholders of the corporation.
Article 4: Officers of the Corporation
A corporation must have at least one officer. A person may act as an officer without being a director. The officers of the corporation are elected by the directors of the corporation subject to any limitation in the articles or bylaws on who can be elected as officers.
Article 5: The Purpose of the Corporation
The purpose of the corporation must be stated in the articles of incorporation. This purpose cannot violate any state or federal law, give undue preference to an individual shareholder, or contravene public policy. The business must be lawful and may not seek to do anything which is against public policy. Generally, corporations formed for charitable purposes are prohibited under this code.
Certificate of Incorporation Filing Fee
The filing fee for a Certificate of Incorporation is $75 if filed electronically and by mail is $125 (plus an additional $30 for processing). Additional amendments to the articles of incorporation require payment of another filing fee.
The Secretary of State’s office only accepts checks, money orders, cashier’s checks, and credit cards (American Express, Discover, MasterCard, and Visa) as forms of payment. Corporate records must be kept at the company’s principal place of business in whole or part. Records include:
- acts and resolutions;
- stock records;
- accounting records;
- sales slips;
- books and accounts;
- tax returns;
- financial statements such as balance sheets;
- stock ledger.
Records may be kept on microfilm or on any other medium if authorized in writing by the Director of the State Comptroller’s Office.
Articles of Incorporation
Articles of Incorporation Texas can be used for a foreign entity registered to incorporate in Texas under another name (called a Foreign Registered Agent) or for Texas Corporations that want to change their name (s). The fee is $35.
Additional amendments require additional filing fees of $50. This form is not currently online but can be downloaded from the Secretary of State’s website, www.sos.state.tx.us
How to Find Articles of Incorporation in Texas?
To find a business’s articles of incorporation in Texas, conduct an extensive search on the Secretary of State’s website, www.sos.state.tx.us, which has all incorporations since 1919 available online; other states do not offer this service (a list of alternate places to look is provided below).
The filing fee for records at the state level is $20 and includes only the most basic information about the professional corporation:
- registered agent name and physical street address
- nature of business (not always accurate)
- principal office address(es) (again not always accurate)
- business entity status (active/inactive)
- a number of authorized shares
- corporate disclaimers (if any exist)
- last reported mailing date
- whether or not annual reports are due.
How to Write Articles of Incorporation?
In order to file articles of incorporation in Texas, a business must have three or more incorporators who meet the requirements of state law, including being a U.S. citizen and not having been convicted of a felony within the past five years (although a person with a criminal conviction may be an incorporator if pardoned).
- Organizing members use their company name as the articles of incorporation title at the top of page 1; these members will also sign on page 2 after filing with the secretary under penalty of perjury that they are authorized to sign by all necessary corporate authorities.”
- It is important for these individuals to understand their duties as corporate officers, which include keeping all corporate records and documents, establishing bank accounts for the business, owning no more than 20% of the company’s outstanding shares, and transferring ownership in a closely-held corporation according to state law.
- Board resolutions are also considered corporate bylaws and must contain information about meeting dates, where annual reports must be sent, and what type of notice is required for a quorum to vote on certain issues.
How to Change Articles of Incorporation?
In order to update articles of incorporation in Texas, either download the form from the Texas Secretary of State website (www.sos.state.tx.us ) or get it from your local print shop or office supply store along with replacement certificates if necessary; then file these forms with the secretary of state not later than the 15th day after the date of the amendment.
How to File Texas Articles of Incorporation?
You can visit the Secretary of State’s website at www.sos.state.tx.us and follow the directions for filing articles of incorporation; you will be required to pay a $75 filing fee electronically or by mail, which includes an additional $30 processing fee if sent by mail.
You can also download samples by clicking on “Articles of Incorporation” under either “Prepare & Publish Your Business Documents” or “How to Register With the SOS,” depending on your needs. The fee for board resolutions is usually nominal but depends on the number of copies requested (more copies are more expensive).
Copies typically cost between $1-$4 each plus an additional 30¢ per page for printing and postage.
How to File Articles of Incorporation for Profit Corporation?
Samples of the articles of incorporation for-profit corporations in Texas can be found on the Secretary of State’s website at www.sos.state.tx.us or ordered from a local print shop or office supply store, depending on your needs and preferences.
How to File Articles of Incorporation for a Non-Profit Corporation?
The secretary must file notarized copies of non-profit corporation articles with all appropriate government agencies within 30 days after filing with the Secretary of State; this requirement applies to any substantial amendment that would change the original application, such as changing the corporate name location, dissolution date, etc.
The Secretary of State does not keep a list of registered non-profit corporations but will provide forms upon request (contact information at www.sos.state.tx.us ).
How to Elect S-Corporation Status?
S-corporations are typically taxed as C-corporations, but they can elect S-Corporation tax-deductible status by filing Form 2553 (Election by a Small Business Corporation) with the Internal Revenue Service.
To qualify for an election to be treated as an S-Corporation, C corporations must meet several requirements, including:
- having no more than 100 shareholders who are individuals, estates, or certain trusts
- not having more than one class of stock.;
- either 50 percent of the corporation’s gross receipts must come from passive sources such as royalties or investments plus other requirements outlined in Section 1361(a)(3)(B).
The election takes effect on January 1 of the year filed, so it is important to file early enough before this date to make the election.
Texas Articles of Incorporation Submission Tips
- Make sure to write out all of your titles in full, so Articles of Incorporation rather than Art. of Incorporation or a similar variation.
- Include specific names and numbers for registered agents and business addresses, but if you have changed these numbers since filing the articles with the Secretary of State, be sure to provide your previous agent’s information along with that of your new agent.
- In addition, it is important to use only one typestyle throughout the document since changing styles can cause formatting problems when submitting documents electronically or through an online print shop.
Texas has multiple types of business taxes. The franchise tax is the most common among small businesses (chart at www.window.state.tx.us ). For more information on Texas taxes, visit www.window.state .tx . us/businesses/taxes/#CONTENTS or call 1-800-252-1382 (CPA).
Texas Nonprofit Periodic Reports and Fees
Nonprofit corporations must file a yearly report and pay a $5 filing fee or $1 if filed online (annual report at www.window.state . tx . us/corp/corptxt.html ).
In addition, nonprofits must complete form BOA-1019M any time they move their principal business location to another county in the state or change registered agent for service of process; this requires paying a $25 transact business fee per submission (form at www.window.state .tx .us / corp / boa119m . HTML).
Nonprofits are also required to register with Comptroller’s Local Exemption Office before soliciting contributions from residents within a 100 mile radius of the nonprofit’s primary headquarters address;this requires filing form PF-1096 (guide at www.window.state .tx .us / corp / pf1096 . html).
Texas Nonprofit Information for Public Inspection
To keep the public properly informed about your nonprofit organization, you should post this information at all of your business locations (include a physical address, name of the organization, and contact information).
Keep records that prove your website correctly reflects the required information since there are severe penalties for misreporting this information to the public. Made public both ways if filing/mailing paper documents or by registering online via www.window. state. tx. us/registration / corp/dbafiling.html if voicing for electronic submission.
Forming an LLC Vs. Corporation Texas
Texas has more than 60 types of corporations each with different requirements and privileges (linked at www.window . state .tx . us/corp / corpxt . html).
For example, nonprofit corporations are not required to provide any of the information that is required for for-profit corporations in their articles of incorporation; this will be handled by the Secretary of State’s office when they file your initial documents.
The cost to file articles of incorporation is also higher than most states due to the increased government fees; however, there is no additional cost involved with incorporating as a non-profit corporation.
You do not need to draft an operating agreement if you form a limited liability company (LLC) since it is similar to a partnership in terms of business organization (however, it is recommended that you consult with an attorney to ensure all of the rights are covered).
Forming a Corporation in Texas – Doing Business As (DBA)
If your business name does not include the legal corporate entity’s full name, you may also need to file a DBA statement. This information should be included in any correspondence or advertisements since it will avoid possible confusion between your company and another Texas-based corporation.
If you apply for an operating business license or permit or if someone sues your business, they can check to see whether there are any other businesses operating under this name in the state of Texas. The DBA filing fee is $5 per name listed on the application form that you submit online.
You may wish to consult with an attorney before filing any documents since they will give legal advice and help you determine which type of business organization is required depending on the nature of your specific business activity.
Some businesses that conduct activities in multiple states may require incorporating in each state rather than just one. It is important to keep track of business licenses and permits needed for the different jurisdictions if you decide to go this route; otherwise, you could run into tax and other legal issues later down the line.
Although it may take more time and effort initially to incorporate a lawful business, it will be worth it when you protect your personal assets from being seized in the event something goes wrong.