You need help from an experienced Austin business formation lawyer when you want to set up a corporation. The legal team at the Law Office of William Jang, PLLC has experience helping new entrepreneurs choose the right business structure and navigate the regulations in Texas.
To take full advantage of the business-friendly Texas laws and operate legally in the state, it’s important to take care when starting your business to choose the correct structure. No matter what type of business you opt for, it’s necessary to be compliant with Texas business regulations.
When you have questions, we’re available to answer them and provide the guidance you’re looking for. The sooner you speak to an attorney when you’re developing your business, the more help you’ll receive and the easier it is to avoid potential problems. Contact our office today at (512) 323-2333 for a confidential consultation with one of our attorneys.
Types of Business Structures
There are several types of business structures from which you can choose as you’re developing your organization. Generally, businesses are created as a:
- Sole proprietorship
- General partnership
- Limited liability company
- Limited partnership
- Limited liability partnership
To form a corporation in Texas, a business owner must file a certificate of formation with the Texas Secretary of State. This can be done by mail or online.
A corporation is a legal entity that has specific characteristics as defined by the state. These include limited liability and centralized management. The owners of a corporation are also called shareholders. Those people who are in positions of management in the business and corporation are called directors.
Under Texas law, shareholders can agree to eliminate the position of director and manage the corporation as shareholders. It is important to work with an attorney to choose the best management structure based on your business needs.
There are three types of corporations a business can form in Texas, each with its own unique set of advantages and disadvantages. These are a “C,” “S,” and “501(c)3” corporation. These designations refer to federal tax structures and how they impact the business.
A C corporation is considered the default form and, therefore, requires less paperwork and is easier to create. C corporations have an unlimited number of shareholders, but the tax structure is less advantageous than that of an S corporation. Corporate owners are also not allowed tax write-offs for business expenses on their personal tax returns, but the corporate structure is allowed to deduct some employee benefits.
An S corporation can be created after you meet additional requirements over and above those you must have to create a C corporation. For example, in Texas, an S corporation cannot have more than 100 shareholders, and none can be foreign citizens or corporations. The tax structure is also different for the corporate owner and how it impacts their personal taxes.
A 501(c)(3) organization is tax-exempt by the IRS and must be operated exclusively for tax-exempt purposes. None of the earnings of the business can be for the benefit of private interest. Most are charitable organizations.
Figuring out the type of corporation you want to form and register can be challenging. An experienced business formation lawyer can help you avoid the pitfalls and speed up the process.
Benefits and Requirements of an Austin Corporation
Forming a corporation provides shareholders with limited liability for the business’s finances. This means if the business is sued, a creditor cannot go after your personal interests, only after the corporation’s assets.
To create a Texas corporation, you must have a name for the corporation that is not being used by anyone else. You must also file with the state the names and addresses of the organizers and directors of the business. The form will ask for the corporate purpose, stock structure, and how long the corporation will remain active if it is not perpetual. Additionally, Texas corporations must have a registered agent and registered office.
Texas Requires a Registered Agent
A registered agent is either a person or an organization that’s been appointed by the corporation to receive specific documentation on behalf of the business. These include correspondence from the government, compliance documents, or notice of a pending legal lawsuit.
If you choose an individual to be the registered agent of your corporation, they must be 18 years or older, have a physical address within the state, and be available in person every day during normal business hours.
In other words, the address must be a street address and not a post office box. However, it does not need to be the same as your corporation’s address. For this reason, many corporations choose a professional registered agent service or a business entity that is open during normal business hours.
Do You Have to Be a U.S. Citizen or Texas Resident?
According to Texas law, you do not have to be a U.S. citizen, U.S. resident, or Texas resident to create or own a business in Texas. The law does require the organizer to be capable of entering into a contract. Interestingly, the corporation can create a requirement for residency in Texas or citizenship in the U.S. for directors in the formation documents.
Does a Corporation Have to Issue Stock?
A for-profit C corporation or S corporation must issue shares of stock. This is used to provide capital and to separate the owner’s personal assets from the business assets. There is no minimum value that must be assigned to the shares, but they cannot have a zero value.
Contact the Law Office of William Jang, PLLC Today for Help Forming a Corporation
Forming a business structure in Texas can be a complex legal process. You must strictly adhere to Texas regulations and federal tax laws. If you are forming a new business and want to be fully protected under the law, contact the Law Office of William Jang, PLLC for help creating your corporation.
Call our office today at (512) 323-2333 to schedule your confidential consultation. One of our experienced attorneys will review your details and offer you advice on your next best steps.