If you are planning to start a business or have been running a successful business for some time, incorporation may offer your business a number of invaluable benefits, including:
- More protection for your personal assets;
- Easier access to capital;
- Tax benefits that can mean the difference between a profit or a loss;
- Enhanced Privacy; and
- Prestige
Texas is a great state in which to form a corporation due the size of its economy, business-friendly laws, lack of income tax, and large body of corporate case law. What’s more, Texas is one of the easiest states in which to incorporate.
In order to form a corporation in Texas, you will need to file a Certificate of Formation with the Texas Secretary of State. The Certificate of Formation, called Articles of Incorporation in other states, is the document that officially creates a Texas corporation and begins its existence as a separate legal entity apart from its owners.
Filing a Certificate of Formation is the first step in the Texas incorporation process. This step must be completed before you can obtain a tax ID number or employer identification number (EIN) and, in many cases, before you can obtain the licenses and permits you will need to legally engage in business activities.
Certificate of Formation Requirements
Form 201 (Certificate of Formation for a For-Profit Corporation) can be found on the Secretary of State's website along with the forms for other types of corporations. Completion of this form will require the following information:
- Your corporate name;
- The name and address of your corporation's registered agent;
- The names and addresses of each member of your corporation's Board of Directors;
- The total number of authorized shares your corporation will authorize and their par value; and
- The name and address of the corporation's organizer/incorporator.
The name of the corporation: It is important to register a corporate name with the state that is distinguishable from other business names already in use in the state. The name of your corporation must include the words Incorporated, Corporation, Company, or Limited, or the abbreviation Corp., Inc., Co., or Ltd.
Registered agent: Texas requires all corporations to have a registered agent to receive service. Your registered agents can be a domestic or foreign entity that is registered to do business in Texas, or an individual who resides in the state.
Directors: You must list the name of at least one natural person.
The total number of authorized shares: This includes identifying the type of shares that the corporation will authorize and their par value, if applicable. This can always be amended later in the event the corporation needs to issue additional shares.
Incorporator information: The incorporator is the person who signs the Certificate of Formation and appoints those who will serve on the initial Board of Directors until the first annual meeting of shareholders. The incorporator may be any individual involved in the company or even the company’s attorney.
Once Form 201 has been completed, it must be signed by the corporation's incorporator and filed with the Secretary of State, along with a filing fee of $300. This can be done either online, in person, by mail, or by fax.
Drafting Your Certificate of Formation
Since it is a matter of public record, you should not include any information in your Certificate of Formation that is more specific or detailed than it needs to be, or that is of a confidential nature. More detailed information regarding the corporation's governance, operation, and management will be contained in its corporate Bylaws.
When drafting your Certificate of Formation, the assistance of a qualified and experienced Texas business formation attorney will help to ensure that you comply with all of its requirements. What's more, by allowing your attorney to serve as your incorporator, you can enjoy more privacy.