Five Steps to Start a Corporation in Texas
Are you looking to start a corporation in Texas? Incorporating in the Lone Star State is a manageable process that we can walk you through in five easy steps! Major steps include naming your corporation, choosing a registered agent, completing the Certificate of Incorporation, creating appropriate bylaws for your company, and designating the initial director(s). Got questions after you read this summary? Reach out to one of our PRIME advisors for a free consultation.
Start a Corporation in Texas
Step 1: Name Your Corporation
To begin, you should choose a business name for your corporation. The name should not be the same as any other in the state and it should fulfill the Texas corporation naming requirements.
Texas Guidelines for Corporation Naming:
- The name should include corporation, company, incorporated, or an abbreviation such as Corp., Inc., Co., Corp, Inc., or Co.
- The name must be different from any other business name in the state which exists, that includes Texas reserved names
- For the most detailed list of naming guidelines, there is a Names of Entities page on the Texas Secretary of State’s website
Is my desired corporation name available?
The desired corporation name should be different and unique to other existing business names in the state. The Texas SOSDirect system is a good resource to use to figure out if your desired business name is available.
Is the URL available for purchase?
To create cohesive branding, check if the URL handle for your desired business name is available. You should buy the domain immediately, even if you aren’t using it right away, to reserve the naming rights. GoDaddy is a great option for reserving your domain name.
Step 2: Choose a Registered Agent
To continue with the incorporation process, you should choose a Texas registered agent before you register with the Department of State.
An LLC or corporation chooses a registered agent to be in charge of documents, government correspondence, and service of process. This is a point person for your new company.
The registered agent can be any individual, business entity, or professional registered agent service as long as they meet the following requirements:
- 18+ years in age
- Physically reside in the state with an address
- Accessible during expected business hours in-person
In Texas, the registered agent must agree to the appointment with a written or electronic document signature. The consent process does not need to be handled by the secretary of state.
The Texas Form 401-A: Consent of Agent requires the following information:
- LLC Name
- Name and signature of registered agent
- Date of Signing
- An express statement consenting to the position
Step 3: Hold an Organizational Meeting
Hosting an organizational meeting in the same time frame as filing an Articles of Incorporation is crucial to distributing task responsibility.
Some of these tasks include:
- Filling out the Certificate of Formation
- Writing and managing bylaws
- Choosing initial director(s)
- Organizing share structure
- Creating an Incorporator’s Statement
Write and Manage Bylaws
Corporation bylaws are rules that delegate governance and how your business will be run. They serve as a mock constitution, making the rules and delegations of responsibilities easy to determine.
A corporation’s bylaws will supplement any rules set forth by the federal government or the state.
Some important topics for bylaws include:
- Proper corporation governance—who will fill what role
- Record keeping and management
- Bylaw amendment structure
Choose Initial Director(s)
You must choose a minimum of one director to oversee your corporation until at least the first shareholder meeting. This person, called a corporate director, will be in charge of elections of positions as well as the amendment and addition of bylaws. The incorporators or initial directors will then be in charge of holding an organizational meeting. During this time, the incorporators will choose the Board of Directors, or the initial director(s) will designate the proper officers.
Organize the Equity Structure
Stock is how one determines the percentage of equity or ownership, one has in a company. The higher number of shares, the more ownership you have.
The division of shares can be laid out into share classes, which hold different rights and privileges. You can set up as many classes as you want, keeping in mind that the more complicated you make the equity structure, the harder it will be to administrate your Texas corporation. A higher number of authorized shares provides ownership protection and allows you to issue shares without legal fees.
Create an Incorporator’s Statement
This statement contains all names and addresses of each initial director and should be stored in the corporate records book. This document functions until the Board of Directors (BOD) is elected during the first shareholder’s meeting.
Step 4: File the Texas Certificate of Formation
The next step is to file the Certificate of Formation with the state. This document officially creates your Texas corporation. It can be filed online, by mail, by fax, or in person with the Texas Department of State. It costs $300 to complete this process.
The Texas Certificate of Formation will include the following information:
- Corporation Name
- Statement of Purpose
- Registered Agent Name and Address
- Corporate Director(s) List and Address
- Authorized share count
- Organizer name and address
It should be noted that the online Certificate of Formation document is only capable of starting a corporation with one share class. If more share classes are desired, you must compose your own Articles of Incorporation.
Texas Secretary of State
P.O. Box 13697
Austin, Texas 78711-3697
Texas Secretary of State
James Earl Rudder Office Building
Austin, Texas 78701
Fax: (512) 463-5709
Step 5: Obtain an EIN for Your Corporation
An Employer Identification Number (EIN), or Federal Tax Identification Number (FTIN), is a form of a social security number for a company.
EINs are used for opening business bank accounts, federal and state tax filing, and hiring new employees for the company.
Starting a Corporation in Texas—Frequently Asked Questions:
Do I need a DBA or trade name for incorporation?
Yes, you need your Texas corporation to operate under a name other than your legal business name.
What is a share class?
A share class is a set of shares grouped together which share the same privileges relative to other groups of shares in the same company.
How do I get an EIN for my corporation?