When starting your new business in the United States, deciding whether or not to incorporate is one of the most crucial choices you will have to make. As with any legal structure, corporations have certain advantages and disadvantages. Having credible Houston corporate law attorneys on your side can be beneficial in helping you decide by analyzing the nature and needs of your business.
At Vestige Law, our legal team can help you assess whether incorporating is the best option for your business. Contact our law office now and schedule an initial consultation with our qualified Texas business attorneys to learn more about the incorporation process.
Why Do I Need a Corporate Law Attorney in Texas?
As a business owner, deciding which corporate structure fits your company’s needs is critical. Texas corporate business law can be challenging to navigate on your own. Therefore, seeking legal advice from our trusted Houston corporate lawyer is highly recommended. They can guide you through the incorporation process and ensure that you have taken all necessary steps to protect your assets and avoid future problems.
At Vestige Law, our law firm can:
- Focus on dealing with corporate and real estate law, from shareholder rights litigation to business asset protection, real estate development, investment, and more.
- Assess whether your Houston business needs to incorporate, find the most beneficial corporate structure, and prepare and file the necessary documents.
- Draft articles of incorporation, advise directors and officers of their responsibilities, create bylaws, and go over other policies used to manage the company.
- Provide legal advice on document preparation and business litigation services related to Texas business laws.
- Handle all aspects of examining, negotiating, and drafting legal contract agreements while ensuring these agreements follow state laws and the demands of our clients.
Our business law firm has over a decade of extensive experience advising business owners on Texas corporate law and helping them understand the advantages and disadvantages of all options. Contact our law office and schedule an initial consultation to discuss your situation now!
What is a Corporation?
A corporation is a form of business ownership that helps prevent personal liability for business debts. It is a distinct legal business entity, meaning the business owns the property, pays taxes, and enters into contracts separate from its owners. The corporate structure is often created when you need to attract investment capital or wish to offer employees stock options as part of the recruitment process.
The owners of a corporation are shareholders (also known as stockholders) who obtain an interest in the business by purchasing shares of stock. Shareholders elect a board of directors responsible for managing the corporation. Whether it is to save money on taxes, attract investors, protect yourself, or boost reputability, starting a corporation with the help of our competent Houston corporate lawyer might be the best next step for you and the business.
What are the Types of Corporations?
There are many ways to legally structure a business as a corporation, depending on the type, scale, and business scope. Each corporation type offers its unique advantages and disadvantages. The type of corporation you choose affects everything from tax status to the myriad ways you can be brought into court.
A corporation can be formed as a for-profit or a not-for-profit entity. For-profit entities are formed to generate revenues and provide a return to their shareholders according to their ownership percentage in the corporation. Not-for-profit entities operate under charitable organizations dedicated to scientific, religious, educational, or research purposes. A top-ranking Houston corporate law attorney can help you determine the most appropriate type of corporation that will help accomplish your business goals.
C Corporation
A C corporation is a traditional corporate business formation. Because a C corporation is a separate legal entity, the debts and liabilities of the business are separated from the liabilities of the directors, investors, and shareholders. This means that the owners are not personally liable for the business’s obligations, and their assets will not be at risk.
C corporations are typically much more attractive to potential investors, like venture capitalists and shareholders, because this business structure allows for wider corporation ownership. However, C Corporations can cost more maintenance than limited liability companies (LLCs), S Corps, or sole proprietorships. In addition, owners receive profits and are taxed at the individual level, while the corporation is taxed as a business entity, creating a double taxation situation.
S Corporation
S corporation is created the same way as a C corporation but is distinct in business owner limitation and tax purposes. It is a special tax status granted by the IRS (Internal Revenue Service) that lets corporations pass their corporate income, credits, and deductions to their shareholders.
An S corporation comprises up to 100 shareholders and is not taxed separately. Instead, the shareholders shoulder the profits and losses on their income tax returns.
Non-Profit Corporation
A non-profit corporation has a separate existence. It can enter into its contracts, sue, and be sued in its name and is responsible for its contractual and other obligations. It is formed to carry out charitable, educational, religious, or other activities for the public benefit. Non-profit corporations can apply for both federal and state tax-exempt status.
How Do I Form a Corporation?
When you incorporate a business, you are setting it up to operate as a separate entity with legal rights recognized by the state. Texas corporation law defines how a business must be formed and maintained to receive benefits associated with specific legal business entities. Our knowledgeable Houston corporate law attorneys can help you understand the process of corporate business formation.
To form a corporation, you must take these essential steps:
- Select a business name that complies with Texas corporation rules.
- Appoint the initial directors.
- File formal paperwork (called “articles of incorporation”) and pay a filing fee. Create corporate bylaws, which lay out the operating rules for your corporation.
- Conduct the first meeting of the board of directors.
- Issue stock certificates to the initial owners (shareholders) of the corporation.
- Secure the permits and licenses required for your business.
Call Our Seasoned Houston Corporate Law Attorneys Now!
Choosing which type of legal entity best fits your needs is one of the most crucial steps when forming or growing your business. The type of legal structure you choose for your business will play a significant role in your success. Forming a corporation for your Texas business is a decision that should consider the issues of taxes, liability, management, transferability of ownership interests, and formality of operation.
Texas corporate law can be complex and confusing. To learn more about how a corporation can protect you and your business, our experienced Houston business attorney at Vestige Law can help you weigh the options and take the correct steps to set up your new business in full compliance with the state law. We can help you generate and file the appropriate paperwork, form company agreements or bylaws, and identify any regulatory requirements needed for your specific business.
Our business law firm will take the time to learn the details of your business operation and your short and long-term goals so that we can identify and implement the appropriate legal measures to keep your company strong and moving forward. Call us now and schedule an initial consultation with our skilled Houston business lawyer. We provide our legal service to numerous clients in Greater Houston and surrounding areas.
FAQs
What are the Benefits of Forming a Corporation?
Incorporating a business offers several advantages that can benefit entrepreneurs and business owners. The benefits of incorporating a business can vary based on your specific circumstances, industry, and location. Consulting with a Houston TX business law attorney is highly recommended to ensure you make informed decisions and maximize the benefits of incorporating for your particular business.
Here are some key advantages of incorporating:
- Power Structure: The corporate business form has an established power and management structure: directors, officers, and shareholders. Each group has its own set of clearly-defined roles and responsibilities within the corporate framework.
- Limited Liability Protection: As a shareholder or owner of a corporation, your personal assets are generally separate from the corporation’s debts and legal liabilities. This means that in the event of legal claims or financial obligations, your personal assets are generally shielded from being used to satisfy the corporation’s obligations. This protection helps safeguard your personal wealth and minimizes personal risk.
- Ability to Attract Investors: Operating as a corporation often enhances your business’s credibility and professional image. Incorporating can instill confidence in stakeholders and attract potential customers or clients who may prefer to engage with established and recognized corporate entities. The corporation’s ability to issue stock is a strong selling point to those willing to invest capital in a business venture.
- Stock and Stock Options for Employees: Especially for larger businesses, the corporate business structure offers an appealing opportunity to potential employees such as stock benefits and stock options.
- Transfer of Ownership and Easy Exit Strategy: Corporations generally offer greater flexibility in transferring ownership. Shares of stock can be easily transferred or sold to new investors or shareholders, allowing for a smoother transition of ownership and potential exit strategies. This can be valuable when planning for retirement, selling the business, or bringing in new partners or investors.
How Much Does it Cost to Form a Corporation in Texas?
The cost of forming a corporation in Texas can vary based on several factors such as the specific requirements of your corporation, the level of legal assistance sought, and any additional services or documentation needed. Consulting with a Houston business law attorney can help you understand the full scope of costs associated with forming a corporation in Texas and ensure that all necessary steps are taken correctly. Some of the expenses associated with forming a corporation include the following:
- You can register your business name with the Texas Secretary of State for $40.
- To file your Certificate of Incorporation, the Texas Secretary of State charges a $300 filing fee.
Who Should Form a Corporation?
Because of the legal complexities, formalities, and expenses associated with setting up a corporation and issuing stock, you should form a corporation only if you have good reason to do so. Here are some situations in which incorporating your business instead of forming a corporation might make sense:
- Your business is so profitable that you can save significant income tax dollars by keeping some profits in the corporation each year.
- Your business needs the ability to issue stock or stock options to attract key employees or outside investment capital.
- You own a family business and you want to begin making gifts of ownership to your family as part of your financial or estate plan or to plan for the next generation of owners.
Does my Corporation Need a Business License in Texas?
The State of Texas does not require a general business license. However, some types of businesses require state-wide licenses. It is advisable to check with your city or county government website to determine your local requirements.
