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Incorporate in Texas

For Incorporate in Texas prices and State Filing Fees, please visit the costs page for Incorporating in Texas .

Incorporating in Texas is the next leap that Texas entrepreneurs and business men and women take when they want to take their business to a new level in terms of worth, credibility, and asset protection. Investors in particular tend to look for these benefits when looking for a suitable investment in order to maximize their investment and shield them from untoward liability. Incorporating in Texas offers shareholders protection from business debts and lawsuits, potential taxation benefits, and increased confidentiality. While there are a number of factors that must be considered before deciding that Texas is the state best suited for your corporation, if these factors are applicable to you and your business, then incorporating in Texas can offer a substantial advantage to you and your company.

Factors to Consider

The decision to incorporate yourself or your company in Texas should be based on the business goals for your company, where you intend to conduct the business, and where you intend to bank and establish financial/credit footholds. If the vast majority of your business is to be conducted within the state, and you intend to open an account and establish lines of credit with a Texas bank, then it is easy to determine that this is the state you should incorporate in. Failing to incorporate in Texas when you intend to conduct most of your business dealings in the sate will lead to some disadvantages, with your corporation responsible for registering as a “foreign corporation,” and responsible for other regulatory and Franchise fees and qualification requirements. These can at times add up to what it would have cost to incorporate in the state to begin with, and hence, if this is the case for your company, it only makes sense to incorporate in this state.

Taxation

The Texas Franchise tax is computed at the rate of .25% of net taxable capital and 4.5% of net taxable earned surplus. If the amount computed under either part of the basis formula is zero or less, the tax is zero. If the amount of tax computed is less than $100, the corporation is not required to pay such amount and is not considered to owe any franchise tax for the period. Further, IRS subchapter S corporations are not recognized by Texas and thus the state levies tax at the corporate and shareholder levels.

It is also imperative to remember that you observe the general corporate formalities once your corporation is formed. This will help ensure the integrity of your “corporate veil” and provide you and your corporation with the liability, asset, and tax protection and benefits that incorporating in Texas can offer.

Assuming that you indeed intend to conduct business in Texas, establish a financial foothold there, and observe the corporate formalities, then incorporating in Texas makes perfect sense.

Advantages of Incorporating in Texas

Asset Protection from Liability. Incorporating in Texas offers protection for Officers and Directors from personal liability against any lawsuits or business debts arising from the operation of the corporation or by actions committed on behalf of the corporation. The extent of liability exposure is limited to the amount of initial investment.
Stock Flexibility. Texas corporations may sell, transfer, gift, or purchase shares of it’s own corporate stock. A corporation may issue stock for cash, property and services. Directors can determine the worth or value of the stock, and the stock can be in any quantifiable form: property, capital value, liquid funds, etc.
Credibility. Incorporating in Texas will increase the “credibility” of your company, and will increase the amount of investor interest in your company. It speaks of “serious business” when your company is incorporated.
Management Flexibility. Texas corporations are only required to list one Director position in the articles of incorporation. There are no residency requirements for the director, though he or she must be at least 18 years of age.
Confidentiality. Only the director and the resident agents are disclosed as a matter of public record in Texas. Stockholders’ names are not a matter of public record. Further, depending on the type of formation (LLC, etc.), a corporation can hold shares of stock.
Tax Advantages. Texas Franchise tax is computed at the rate of .25% of net taxable capital and 4.5% of net taxable earned surplus. If the amount computed under either part of the basis formula is zero or less, the tax is zero.

It should be apparent that incorporating in Texas offers shareholders and investors alike a substantial shield from liability, asset protection, and confidentiality. Having the “inc.” after your company name will go a long way towards establishing it as a credible company, and will be an excellent way to attract investors all the while reassuring providing them and their assets substantial protection from liability and debt. With a diligent implementation and business development strategy, you can build your business into a highly competitive, investment-attracting entity.