Difference between revisions of "How to Start a Company in Texas"

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==Basic process==
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This page is a part of the McNair Center's [[Guide to Small Business in Houston]].
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'''Step 1: Business Structure and Name'''
 
  
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'''Determine the legal structure of the business and properly file the business name with the state and/or county.'''
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This is an overview on how to create a business in Texas. For more comprehensive guidance and assistance, consult the [https://texaswideopenforbusiness.com/sites/default/files/pdfs/smallbusinesshandbook.pdf Texas Small Business Handbook].
  
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#Sole Proprietorship
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==Basic Process==
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#*Subject to state franchise tax
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==='''Step 1: Business Structure and Name'''===
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#For Profit Corporation
 
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#*Subject to state franchise tax
 
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#*$300 filing fee for certificate
 
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#Professional Corporation
 
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#*Subject to state franchise tax
 
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#*$300 filing fee for certificate
 
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#Professional Association
 
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#*Subject to state franchise tax
 
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#General Partnership
 
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#*Not subject to state franchise tax
 
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#Limited Partnership
 
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#*Subject to state franchise tax
 
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#*$750 filing fee for certificate
 
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#Limited Liability Partnership
 
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#*Subject to state franchise tax
 
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#*$200 filing fee for certificate
 
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#Limited Liability Company
 
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#*Subject to state franchise tax
 
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#*$300 filing fee for certificate
 
  
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'''Step 2: Tax Responsibilities'''
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'''Determine the legal structure of the business and properly file the business name with the state and/or county.'''
  
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'''Determine the potential tax responsibilities of the new business on the federal, state, and local level.'''
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*Search for existing [http://www.uspto.gov/trademarks-application-process/search-trademark-database trademarks] - Free
  
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At the federal level, the Internal Revenue Service will be the tax collection agency. You will need to apply for a Employer Identification Number (alternatively called Federal Tax Identification Number) so that the IRS can identify your business.
+
*Reserve a name for 120 days:
 +
**Complete [http://www.sos.state.tx.us/corp/forms/501_boc.pdf Form 501] located at  - $40
 +
**Or reserve a name online at [http://www.sos.state.tx.us/corp/sosda/index.shtml SOSDirect] - $50 per [https://direct.sos.state.tx.us/help/help-corp.asp?pg=fee class]
  
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The state of Texas imposes a state sales tax on "all retail sales, leases and rentals of goods, and services that are expressly enumerated as taxable under the Texas Tax Code." Additionally, any taxable business chartered, organized, or doing business is subject to a state franchise tax. That said, most small businesses are exempt from this kind of tax.
+
*Prepare a certificate of formation:
 +
**Download the [http://www.sos.state.tx.us/corp/forms/201_boc.pdf form] - $300
 +
**Or file online at [http://www.sos.state.tx.us/corp/sosda/index.shtml SOSDirect] ($300) and prepare the following necessary information:
 +
***The name and type of entity being formed;
 +
*** The names and addresses of directors and registered agents;
 +
*** The number and value of initial authorized shares;
 +
*** The business purpose for which the entity is being formed;
 +
*** The name and address of the organizer (i.e., the person responsible for incorporating the company);
 +
*** The effectiveness of the filing, which means when you want the document and the entity to become effective; and
 +
***The signature of the organizer.
  
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Business Inventory Taxes will be collected at the local level, although many municipalities do not tax items that fall under “Goods in Transit Exemption” or the “Freeport Exemption.”
 
  
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Lastly, the Texas Workforce Commission will collect Unemployment Insurance tax from most businesses.
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{|  class="wikitable sortable" style="border: 1px solid darkgray; bgcolor: #f9f9f9"
 +
|+ align="center" size="14px"|'''Business Filing Fees'''
 +
| align="center" style="background:#f0f0f0;"|'''Business Type'''
 +
| align="center" style="background:#f0f0f0;"|'''Filing Fee ($)'''
 +
| align="center" style="background:#f0f0f0;"|'''State Franchise Tax'''
 +
|-
 +
| Sole Proprietorship||0||Yes
 +
|-
 +
| For-Profit Corporation||300||Yes
 +
|-
 +
| Professional Corporation||300||Yes
 +
|-
 +
| Professional Association||0||Yes
 +
|-
 +
| General Partnership||0||No
 +
|-
 +
| Limited Partnership||750||Yes
 +
|-
 +
| Limited Liability Partnership||200||Yes
 +
|-
 +
| Limited Liability Company||300||Yes
 +
|}
  
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'''Step 3: Business Licenses and Permits'''
+
==='''Step 2: Tax Responsibilities'''===
  
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'''Determine necessary licenses, permits, certifications, registrations, and/or authorizations for a specific business on the federal, state, and local level.'''
+
'''Determine the potential tax responsibilities of the new business on the federal, state, and local level.'''
  
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There is no general "business" license in the state of Texas, instead there are different licensing procedures for various professions. The Texas Department of Licensing and Registration has a full list of the specific professions that need additional accreditation. You should also contact the local government of the city you are choosing to operate in to find out if there are any specific licensing needed to conduct business.
+
*[https://www.irs.gov/businesses/small-businesses-self-employed/how-to-apply-for-an-ein Apply] for a Employer Identification Number (EIN) (alternatively called Federal Tax Identification Number)
 +
**Texas requires that an EIN for businesses, which is used for tax purposes.
  
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'''Step 4: Business Employer Requirements'''  
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*'''Federal Taxes'''
 +
**The Internal Revenue Service will identify and determine your tax liability.
  
−
'''Determine federal and state employer requirements. There are various laws relating to employment of personnel.'''
+
*'''State Taxes'''
 +
**The state of Texas imposes a state sales tax on "all retail sales, leases and rentals of goods, and services that are expressly enumerated as taxable under the Texas Tax Code." Additionally, any taxable business chartered, organized, or doing business is subject to a state franchise tax. That said, most small businesses are exempt from this kind of tax.
  
−
As a business owner you have many obligations. You must fulfill Americans with Disabilities Act requirements, Equal Employment requirements, applicable Safety requirements, Wage and Labor requirements, New Hire Reporting, reporting of Workers' Compensation Insurance, and placement of labor posters.
+
*'''Local Taxes'''
 +
**Business Inventory Taxes will be collected at the local level, although many municipalities do not tax items that fall under “Goods in Transit Exemption” or the “Freeport Exemption.”
  
−
(For more information please browse through the [https://texaswideopenforbusiness.com/sites/default/files/pdfs/smallbusinesshandbook.pdf Texas Small Business Handbook])
+
*'''Other Taxes'''
 +
**The Texas Workforce Commission will collect Unemployment Insurance tax from most businesses.
  
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==More Details on How to Incorporate in Texas==
 
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When you create a business in Texas, you have the opportunity to choose from multiple business structures including for-profit and nonprofit corporations. You can incorporate in Texas by naming your company, choosing a registered agent, selecting board members and filing a Certificate of Formation. In addition, if you have already incorporated in another state but wish to do business in Texas, you may have to register your foreign corporation with the state.
 
  
 +
==='''Step 3: Licensing and Permits'''===
  
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<section begin=Choosing a Business Structure />
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'''Determine necessary licenses, permits, certifications, registrations, and/or authorizations for a specific business on the federal, state, and local level.'''
−
=== Part 1 of 4: Choosing a Business Structure ===
 
−
# Consult an attorney. The process of choosing a business structure can be complicated and daunting. However, with the help of an attorney, you will be able to talk about what you expect your corporation to do and how you want to run your business and in return the attorney will be able to advise you on different structures.
 
−
#* To find a qualified business attorney, ask your friends and colleagues for a recommendation. A lot of people deal with business attorneys through their jobs and through their personal dealings. If they know one, they should be able to tell you about what they liked and didn't like about their experience.
 
−
#* If you are having trouble finding a recommendation, visit your state's bar association and use their lawyer referral service or search database. Using these tools, you should be able to find a well qualified and honest attorney to help you with your decisions.
 
−
# Decide how you want your business to operate. Before you incorporate you will want to discuss how you want to run your business. Would you like to have passive owners (i.e., passive shareholders) or would you like to have member-managers (common in nonprofits)? Would you like the purpose of your organization to be charitable or something more commercial? These are just some of the questions you should contemplate before starting the incorporation process.
 
−
# Think about where you would like to incorporate. You do not need to incorporate in Texas in order to transact business in Texas. You can choose to incorporate in any state you want to. Whichever state you choose to incorporate in is the state whose law will govern your corporation. However, if you do not incorporate in Texas and you want to transact business in Texas, you will have to register your foreign corporation.
 
−
# Determine how you will use your business's profits. If you want to distribute your profits to shareholders and employees in the form of dividends and bonuses then you might want to consider creating a for-profit corporation. If, however, you want to take profits and put them back into your business or use them for charitable purposes, then you may want to use a nonprofit corporate structure.
 
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<section end=Choosing a Business Structure />
 
  
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=== Part 2 of 4: Forming a For-Profit Corporation ===
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*Create bylaws. While Texas does not set out any concrete requirements for a corporation's bylaws, the bylaws usually contain information about internal rules and procedures, responsibilities of officers, the size of the board, how shareholder meetings will be held.[http://www.dmlp.org/legal-guide/forming-corporation-texas]
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# Name your corporation. Texas law requires that your corporation have a business name. Once you come up with a name, you should trademark it in order to protect its value. To trademark a name you will visit the federal government's Patent and Trademark Office website, fill out the required forms, and file them online with the applicable fees.[http://www.uspto.gov/] The name you choose must meet the following requirements:
+
** You don't have to file these bylaws with the Secretary of State. However, Texas law requires you keep this document at your main office.[http://www.statutes.legis.state.tx.us/DocViewer.aspx?DocKey=BO%2fBO.21&Phrases=%22Bylaws%22&HighlightType=1&ExactPhrase=True&QueryText=%22Bylaws%22]
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#* The name must include one of the following words or an abbreviation thereof: "company," "corporation," "incorporated," or "limited."
+
** You can also look up [http://business.utsa.edu/cite/files/spring15/12083328_2_Bylaws%20(Texas%20Corporation).pdf sample] Texas bylaws in order to get an idea of what should be included.
−
#* The name cannot be deceptively similar to the name of another existing or registered business entity in Texas or a name that has been reserved by a business entity in Texas.[http://www.statutes.legis.state.tx.us/DocViewer.aspx?DocKey=BO%2fBO.5&Phrases=Directors&HighlightType=1&ExactPhrase=False&QueryText=Directors]
 
−
#* You may reserve a name for 120 days by filling out an Application for Reservation (Form 501) or Renewal of Reservation of an Entity Name (Form 505) and paying a $40 fee. You can reserve a name online at [http://www.sos.state.tx.us/corp/sosda/index.shtml http://www.sos.state.tx.us/corp/sosda/index.shtml] or by completing Form 501 located at [http://www.sos.state.tx.us/corp/forms/501_boc.pdf http://www.sos.state.tx.us/corp/forms/501_boc.pdf].
 
−
# Appoint directors. Directors (or the board of directors) are the people responsible for managing the business of the corporation. Talk with possible candidates and ask if they would be willing to act as a director. If you find one or more directors, you will use their names and other personal information when you prepare your certificate of formation.
 
−
#*Texas requires that corporations have one or more directors.
 
−
#*There is no minimum age requirement for directors.
 
−
#*Texas law does not require directors to be residents of Texas or shareholders of the corporation. However, the corporation’s bylaws or certificate of formation may require it.[http://www.dmlp.org/legal-guide/forming-corporation-texas]
 
−
# Choose a registered agent. Texas requires corporations to maintain a registered agent in the state. A registered agent is an individual Texas resident, a domestic entity, or a foreign entity that has qualified or registered to transact business in Texas and who is responsible for receiving and forwarding service of process or official notices addressed to a corporation. entity.[http://www.sos.state.tx.us/corp/registeredagents.shtml]
 
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#* Find someone who is willing to take on this duty and let them know you will be using their name.
 
−
# Prepare a certificate of formation. In order to incorporate in Texas, your business must prepare a certificate of formation (Form 201). You can download the form at [http://www.sos.state.tx.us/corp/forms/201_boc.pdf http://www.sos.state.tx.us/corp/forms/201_boc.pdf]. If you are going to file online, you do not need to download Form 201 but you will need to prepare all the necessary information. The form must include the following:
 
−
#*The name and type of entity being formed;
 
−
#* The names and addresses of directors and registered agents;
 
−
#* The number and value of initial authorized shares;
 
−
#* The business purpose for which the entity is being formed;
 
−
#* The name and address of the organizer (i.e., the person responsible for incorporating the company);
 
−
#* The effectiveness of the filing, which means when you want the document and the entity to become effective; and
 
−
#*The signature of the organizer.[http://www.sos.state.tx.us/corp/forms/201_boc.pdf]
 
−
# File your certificate of formation. Once you have prepared your certificate of formation, it must be delivered to the Secretary of State in person or by mail, courier, facsimile or electronic transmission, or any other comparable form of delivery.[http://www.statutes.legis.state.tx.us/DocViewer.aspx?DocKey=BO%2fBO.3&Phrases=%22Certificate+of+Formation%22&HighlightType=1&ExactPhrase=True&QueryText=%22Certificate+of+Formation%22] When you file you will also be required to pay a filing fee of $300.[https://direct.sos.state.tx.us/help/help-corp.asp?pg=fee]
 
−
#* To file online, you will use Texas' Secretary of State website (SOSDirect) at [http://www.sos.state.tx.us/corp/sosda/index.shtml http://www.sos.state.tx.us/corp/sosda/index.shtml].
 
−
#* If you are faxing your filings you can fax them to the number found on the Secretary of State's website.[http://www.sos.state.tx.us/corp/options.shtml]
 
−
# Create bylaws. While Texas does not set out any concrete requirements for a corporation's bylaws, they should usually contain information about internal rules and procedures, responsibilities of officers, the size of the board, how shareholder meetings will be held.[http://www.dmlp.org/legal-guide/forming-corporation-texas]
 
−
#* You don't have to file these bylaws with the Secretary of State but Texas law requires you keep this document at your main office.[http://www.statutes.legis.state.tx.us/DocViewer.aspx?DocKey=BO%2fBO.21&Phrases=%22Bylaws%22&HighlightType=1&ExactPhrase=True&QueryText=%22Bylaws%22]
 
−
#* You can also look up sample Texas bylaws in order to get an idea of what should be included.[http://business.utsa.edu/cite/files/spring15/12083328_2_Bylaws%20(Texas%20Corporation).pdf]
 
−
# Request an Employer Identification Number (EIN). Texas requires that you have an EIN, also known as a federal tax identification number, which is used to identify businesses for tax purposes.
 
−
#*You can apply online for an EIN at [https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/How-to-Apply-for-an-EIN https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/How-to-Apply-for-an-EIN].
 
−
# Maintain corporate records. Texas corporations are required to maintain the following information:
 
−
#* Books and records of accounts;
 
−
#* Meeting minutes for director, owner or member meetings; and
 
−
#* A current record of the name and mailing address of each owner or member of the corporation.[http://www.statutes.legis.state.tx.us/DocViewer.aspx?DocKey=BO%2fBO.3&Phrases=business%7crecords&HighlightType=1&ExactPhrase=False&QueryText=business+records]
 
−
# Comply with tax requirements. Corporations formed in Texas may be subject to a variety of taxes, including:
 
−
#* Franchise tax;
 
−
#* State sales tax;
 
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#* Federal income tax; and/or
 
−
#* Federal employment tax.[http://comptroller.texas.gov/tba/paytax.html]
 
  
  
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=== Part 3 of 4: Creating a Nonprofit Corporation ===
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*There is no general "business" license in the state of Texas.
−
# Create a name. Texas law requires that your corporation have a business name. Once you come up with a name, you should trademark it in order to protect its value. To trademark a name you will visit the federal government's Patent and Trademark Office website, fill out the required forms, and file them online with the applicable fees.[http://www.uspto.gov/] Your nonprofit organization's name does not have to contain "Inc.", "Ltd.", "Incorporated", or "Company".[http://texascbar.org/wordpress/wp-content/uploads/2011/07/FormingNonProfitTX_REV15_Web.pdf]
+
*There are different licensing procedures for various professions.
−
#* The name cannot be deceptively similar to the name of another existing or registered business entity in Texas or a name that has been reserved by a business entity in Texas.[http://www.statutes.legis.state.tx.us/DocViewer.aspx?DocKey=BO%2fBO.5&Phrases=Directors&HighlightType=1&ExactPhrase=False&QueryText=Directors]
+
**The Texas Department of Licensing and Registration has a full [http://www.tdi.texas.gov/forms/fincolicense/fin325retalreqs.pdf list] of the specific professions that need additional accreditation.
−
#* You may reserve a name for 120 days by filling out an Application for Reservation (Form 501) or Renewal of Reservation of an Entity Name (Form 505) and paying a $40 fee. You can reserve a name online at [http://www.sos.state.tx.us/corp/sosda/index.shtml http://www.sos.state.tx.us/corp/sosda/index.shtml] or by completing Form 501 located at [http://www.sos.state.tx.us/corp/forms/501_boc.pdf http://www.sos.state.tx.us/corp/forms/501_boc.pdf].
+
*You should also contact the local government of the city you are choosing to operate in to find out if there are any specific licensing needed to conduct business.
−
# Prepare your certificate of formation. Your certificate of formation is the document you will file with the Secretary of State that will form your nonprofit. When you are forming a nonprofit you will use the Secretary of State Form 202.[http://www.sos.state.tx.us/corp/forms/202_boc.pdf] Your certificate of formation needs to include the following:
 
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#* A purpose clause, which will define the charitable purpose of your nonprofit corporation;
 
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#* IRS language, which needs to be included in order to get federal tax-exemption and deals with inurement and dissolution;
 
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#* The names of initial directors, which in Texas there must be a minimum of three;
 
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#* The name of the incorporator who signs the certificate;
 
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#* The name and address of a registered agent who will receive all official business correspondence; and
 
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#* The names of members.[http://texascbar.org/wordpress/wp-content/uploads/2011/07/FormingNonProfitTX_REV15_Web.pdf]
 
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# File your certificate of formation. After preparing your certificate of formation you will need to file it with the Secretary of State. It can be filed in-person, through the mail, through fax, or online.[http://texascbar.org/wordpress/wp-content/uploads/2011/07/FormingNonProfitTX_REV15_Web.pdf] If you are filing online you can use the SOSDirect website.
 
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#* When you file you will be required to pay a $25 filing fee.[https://direct.sos.state.tx.us/help/help-corp.asp?pg=fee]
 
−
# Prepare bylaws. Your initial board of directors should create a set of bylaws and one will be necessary if you are filing for federal tax exemption. The bylaws should contain information about:
 
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#* Meetings;
 
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#* Leadership;
 
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#* Quorums;
 
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#* Controls; and
 
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#* Committees.[http://texascbar.org/wordpress/wp-content/uploads/2011/07/FormingNonProfitTX_REV15_Web.pdf]
 
−
# Request an EIN. Texas requires that you have an EIN, also known as a federal tax identification number, which is used to identify businesses for tax purposes.
 
−
#*You can apply online for an EIN at [https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/How-to-Apply-for-an-EIN https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/How-to-Apply-for-an-EIN].
 
−
# Prepare your federal tax-exemption application. To file for federal tax exemption you will need to fill out Internal Revenue Service (IRS) Form 1023. The form can be completed online and must be filed along with a $400 filing fee. Form 1023 must include:
 
−
#* A copy of your certificate of formation;
 
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#* A copy of your bylaws;
 
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#* Financial statements;
 
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#* Your EIN; and
 
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#* Other required fiscal information.[http://texascbar.org/wordpress/wp-content/uploads/2011/07/FormingNonProfitTX_REV15_Web.pdf]
 
−
# Apply for state tax exemptions. Texas nonprofit corporations are required to pay all the same state taxes a for-profit corporation does unless you file for exemptions. In general you will have to file for sales, franchise, and hotel tax exemptions from the Texas Comptroller and property tax exemptions from the Local Tax Appraisal District.[http://texascbar.org/wordpress/wp-content/uploads/2011/07/FormingNonProfitTX_REV15_Web.pdf]
 
−
# Comply with annual reporting requirements. Nonprofit corporations are required to complete and submit a Periodic Report of a Nonprofit Corporation (Form 802), which can be found at [http://www.sos.state.tx.us/corp/forms/802_boc.pdf http://www.sos.state.tx.us/corp/forms/802_boc.pdf]. You can file this form online through SOSDirect.[http://www.sos.state.tx.us/corp/forms_reports.shtml]
 
−
#* Form 802 simply asks you to keep the Secretary of State up-to-date regarding your corporation's name, directors, officers, offices, and any changes you may have to your corporate structure.
 
−
#* The filing fee for Form 802 is $5.[https://direct.sos.state.tx.us/help/help-corp.asp?pg=fee]
 
  
 +
==='''Step 4: Federal and State Employer Requirements'''===
  
−
=== Part 4 of 4: Registering Your Foreign Corporation ===
+
'''Determine federal and state employer requirements. There are various laws relating to employment of personnel.'''
−
# Determine whether you are an applicable business. Only certain business types are required to register with the Texas Secretary of State if they wish to transact business in Texas. All corporations, both for-profit and nonprofit, are required to register and are therefore applicable businesses.[http://www.sos.state.tx.us/corp/foreign_outofstate.shtml]
 
−
# Decide whether you "transact business" in Texas. You only have to register your foreign corporation if you are, or will be, "transacting business" in Texas. Texas statutes do not define what it means to transact business, but they do include examples of things that are '''not''' included in that definition.[http://www.sos.state.tx.us/corp/foreign_outofstate.shtml] Those examples include:
 
−
#* Holding a meeting in Texas;
 
−
#* Having a bank account in Texas;
 
−
#* Collecting a debt in Texas; and
 
−
#* Transacting business in interstate commerce.[http://www.statutes.legis.state.tx.us/Docs/BO/htm/BO.9.htm#9.251]
 
−
# Register your business name. You can register the name of your foreign corporation by completing an Application for Registration of An Entity Name (Form 502).[http://www.sos.state.tx.us/corp/forms/502_boc.pdf] While this form does not give you permission to transact business in Texas, it allows you to reserve or register your business name while you prepare your business registration paperwork. When you file Form 502, which you can do online through SOSDirect, you will have to pay a $40 filing fee.[http://www.sos.state.tx.us/corp/forms_boc.shtml][https://direct.sos.state.tx.us/help/help-corp.asp?pg=fee] The form will require you to provide the following information:
 
−
#* The entity’s name and address;
 
−
#* The jurisdiction where the entity was formed and the date of formation;
 
−
#* The nature of the business;
 
−
#* A Certification of Existence that demonstrates that the organization validly exists and is doing business in another jurisdiction;
 
−
#* The signature of a governing person or a managerial official.[http://www.sos.state.tx.us/corp/foreignfaqs.shtml]
 
−
# Prepare an application for registration. In order for a foreign corporation to transact business in Texas, the business must prepare an Application for Registration (Form 301). The application requires the following information:
 
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#* Business entity name and type as well as any assumed names;
 
−
#* Federal Employer Identification Number;
 
−
#* Business entity’s jurisdiction of formation and the date of formation;
 
−
#* Certificate of Existence showing that the company is validly organized and identifying the laws under which the entity formed;
 
−
#* A statement setting forth the business purpose and the activities the business intends to pursue in Texas;
 
−
#* The beginning date of the business;
 
−
#* Principal Office Address;
 
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#* Initial registered agent and office; and
 
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#* Governing persons and their addresses.[http://www.sos.state.tx.us/corp/forms/301_boc.pdf]
 
−
# File your application for registration. Once you have prepared Form 301, you will need to file it with the Secretary of State, which you can do online through SOSDirect.[http://www.sos.state.tx.us/corp/forms_boc.shtml] When you file you will be required to pay a $750 filing fee.[https://direct.sos.state.tx.us/help/help-corp.asp?pg=fee]
 
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(The above article is obtained from [http://www.wikihow.com wikiHow], a wiki that is building the world's largest and highest quality how-to manual. Please edit this article and find author credits at the original wikiHow article on [http://www.wikihow.com/Incorporate-in-Texas How to Incorporate in Texas]. Content on wikiHow can be shared under a [http://creativecommons.org/licenses/by-nc-sa/3.0/ Creative Commons License].)
 
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==Summary on Forms and Fees==
 
−
Forming a For-Profit Corporation:
 
−
*Search trademark: [http://www.uspto.gov/trademarks-application-process/search-trademark-database United States Patent and Trademark Office] - Free
 
  
−
*Reserve a name for 120 days:
+
Small business owners must fulfill requirements related to:
−
**Completing Form 501 located at [http://www.sos.state.tx.us/corp/forms/501_boc.pdf http://www.sos.state.tx.us/corp/forms/501_boc.pdf] - $40
+
*Americans with Disabilities Act requirements
−
**Or reserve a name online at [http://www.sos.state.tx.us/corp/sosda/index.shtml SOSDirect] - $50 per class[https://direct.sos.state.tx.us/help/help-corp.asp?pg=fee]
+
*Equal Employment requirements
 +
*Safety requirements
 +
*Wage and Labor requirements
 +
*New Hire Reporting
 +
*Workers' Compensation Insurance reporting
 +
*Labor Posters placement
 +
*Other relevant requirements
  
−
*Prepare a certificate of formation:
+
==Common Forms and Fees for Texas Small Businesses==
−
**Download the form at [http://www.sos.state.tx.us/corp/forms/201_boc.pdf http://www.sos.state.tx.us/corp/forms/201_boc.pdf] - $300
 
−
**Or file online at [http://www.sos.state.tx.us/corp/sosda/index.shtml SOSDirect] ($300) and prepare the following necessary information:
 
−
***The name and type of entity being formed;
 
−
*** The names and addresses of directors and registered agents;
 
−
*** The number and value of initial authorized shares;
 
−
*** The business purpose for which the entity is being formed;
 
−
*** The name and address of the organizer (i.e., the person responsible for incorporating the company);
 
−
*** The effectiveness of the filing, which means when you want the document and the entity to become effective; and
 
−
***The signature of the organizer.
 
  
−
*Create bylaws. While Texas does not set out any concrete requirements for a corporation's bylaws, they should usually contain information about internal rules and procedures, responsibilities of officers, the size of the board, how shareholder meetings will be held.[http://www.dmlp.org/legal-guide/forming-corporation-texas]
+
{|  class="wikitable sortable" style="border: 1px solid darkgray; bgcolor: #f9f9f9"
−
** You don't have to file these bylaws with the Secretary of State but Texas law requires you keep this document at your main office.[http://www.statutes.legis.state.tx.us/DocViewer.aspx?DocKey=BO%2fBO.21&Phrases=%22Bylaws%22&HighlightType=1&ExactPhrase=True&QueryText=%22Bylaws%22]
+
|+ align="center" size="14px"|'''Common Forms and Fees'''
−
** You can also look up sample Texas bylaws in order to get an idea of what should be included.[http://business.utsa.edu/cite/files/spring15/12083328_2_Bylaws%20(Texas%20Corporation).pdf]
+
| align="center" style="background:#f0f0f0;"|'''Filing Type'''
 +
| align="center" style="background:#f0f0f0;"|'''Additional Form(s)'''
 +
| align="center" style="background:#f0f0f0;"|'''Filing Fee ($)'''
 +
|-
 +
| Certificate of fact||||15
 +
|-
 +
| Expedited processing of a request for a certified copy or certificate of status or fact||||10
 +
|-
 +
| Certificate of formation for an entity (except nonprofit corporation, cooperative association, PA or LP).||[http://www.sos.state.tx.us/corp/forms/201_boc.pdf 201],[http://www.sos.state.tx.us/corp/forms/203_boc.pdf 203], [http://www.sos.state.tx.us/corp/forms/205_boc.pdf 205], [http://www.sos.state.tx.us/corp/forms/206_boc.pdf 206]||300
 +
|-
 +
| Certificate of formation for a nonprofit corporation||[http://www.sos.state.tx.us/corp/forms/202_boc.pdf 202]||25
 +
|-
 +
| Certificate of formation for a cooperative association corporation||||25
 +
|-
 +
| Certificate of formation for a limited liability partnership or LLLP||[http://www.sos.state.tx.us/corp/forms/701_boc.pdf 701], [http://formfiles.justia.com/pdf/texas/0285/52.pdf 703]||750
 +
|-
 +
| Name reservation (120 days) or renewal||[http://www.sos.state.tx.us/corp/forms/501_boc.pdf 501]||40
 +
|-
 +
| Registration of trademark||[http://www.sos.state.tx.us/corp/forms/901.pdf 901]||50 (per class)
 +
|-
 +
| Expedited processing of a document submitted for filing (except trademark documents)||||25
 +
|}
  
−
*Request an Employer Identification Number (EIN). Texas requires that you have an EIN, also known as a federal tax identification number, which is used to identify businesses for tax purposes. Apply online for an EIN at [https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/How-to-Apply-for-an-EIN https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/How-to-Apply-for-an-EIN].
+
For a comprehensive list of all forms used to register a business or nonprofit, please see [http://www.sos.state.tx.us/corp/forms_boc.shtml the SoS's compiled list].
  
−
[[Category: Public]]
+
For a comprehensive list of all forms used to trademark corporations, please see [http://www.sos.state.tx.us/corp/trademark.shtml the SoS's compilation of trademark forms].
  
−
==Misc. information on forms and fees==
+
For a comprehensive list of report forms, please see [http://www.sos.state.tx.us/corp/forms_reports.shtml the SoS's compiled list].
  
−
'''Payment Methods'''
+
The SoS has also created a [http://www.sos.state.tx.us/corp/formationfaqs.shtml Business Formation FAQ].
 +
===Payment Methods===
  
 
Fees may be paid by:
 
Fees may be paid by:
Line 204: Line 140:
 
*Cash (for in-person submissions only)
 
*Cash (for in-person submissions only)
  
−
 
+
[[Category: SBDE]]
−
*'''Certificate of Fact''' - $15
+
[[category:Public]]
−
*'''Certificate of formation for a Texas entity (except nonprofit corporation, cooperative association, PA or LP). Forms: 201, 203, 205, 206''' - $300
 
−
*'''Certificate of formation for a Texas nonprofit corporation (form 202) or cooperative association (no form provided)''' - $25
 
−
*'''Registration or renewal as a Texas limited liability partnership or LLLP. Forms: 701, 703''' - $200 per partner
 
−
*'''Foreign entity application for registration (except nonprofit corporation, LLP, cooperative association, or credit union). Forms: 301, 303, 304, 305, 306, 309, 311, 312, 313)''' - $750
 
−
*'''Name reservation (120 days) or renewal. Form: 501''' - $40
 
−
*'''Expedited processing of a document submitted for filing (except trademark documents)''' - $25
 
−
*'''Expedited processing of a request for a certified copy or certificate of status or fact''' - $10
 
−
*'''Application for Registration of Trademark. Form: 901''' - $50 per class
 

Latest revision as of 16:37, 3 February 2017

This page is a part of the McNair Center's Guide to Small Business in Houston.

This is an overview on how to create a business in Texas. For more comprehensive guidance and assistance, consult the Texas Small Business Handbook.

Basic Process

Step 1: Business Structure and Name

Determine the legal structure of the business and properly file the business name with the state and/or county.

  • Reserve a name for 120 days:
  • Prepare a certificate of formation:
    • Download the form - $300
    • Or file online at SOSDirect ($300) and prepare the following necessary information:
      • The name and type of entity being formed;
      • The names and addresses of directors and registered agents;
      • The number and value of initial authorized shares;
      • The business purpose for which the entity is being formed;
      • The name and address of the organizer (i.e., the person responsible for incorporating the company);
      • The effectiveness of the filing, which means when you want the document and the entity to become effective; and
      • The signature of the organizer.


Business Filing Fees
Business Type Filing Fee ($) State Franchise Tax
Sole Proprietorship 0 Yes
For-Profit Corporation 300 Yes
Professional Corporation 300 Yes
Professional Association 0 Yes
General Partnership 0 No
Limited Partnership 750 Yes
Limited Liability Partnership 200 Yes
Limited Liability Company 300 Yes

Step 2: Tax Responsibilities

Determine the potential tax responsibilities of the new business on the federal, state, and local level.

  • Apply for a Employer Identification Number (EIN) (alternatively called Federal Tax Identification Number)
    • Texas requires that an EIN for businesses, which is used for tax purposes.
  • Federal Taxes
    • The Internal Revenue Service will identify and determine your tax liability.
  • State Taxes
    • The state of Texas imposes a state sales tax on "all retail sales, leases and rentals of goods, and services that are expressly enumerated as taxable under the Texas Tax Code." Additionally, any taxable business chartered, organized, or doing business is subject to a state franchise tax. That said, most small businesses are exempt from this kind of tax.
  • Local Taxes
    • Business Inventory Taxes will be collected at the local level, although many municipalities do not tax items that fall under “Goods in Transit Exemption” or the “Freeport Exemption.”
  • Other Taxes
    • The Texas Workforce Commission will collect Unemployment Insurance tax from most businesses.


Step 3: Licensing and Permits

Determine necessary licenses, permits, certifications, registrations, and/or authorizations for a specific business on the federal, state, and local level.

  • Create bylaws. While Texas does not set out any concrete requirements for a corporation's bylaws, the bylaws usually contain information about internal rules and procedures, responsibilities of officers, the size of the board, how shareholder meetings will be held.[1]
    • You don't have to file these bylaws with the Secretary of State. However, Texas law requires you keep this document at your main office.[2]
    • You can also look up sample Texas bylaws in order to get an idea of what should be included.


  • There is no general "business" license in the state of Texas.
  • There are different licensing procedures for various professions.
    • The Texas Department of Licensing and Registration has a full list of the specific professions that need additional accreditation.
  • You should also contact the local government of the city you are choosing to operate in to find out if there are any specific licensing needed to conduct business.

Step 4: Federal and State Employer Requirements

Determine federal and state employer requirements. There are various laws relating to employment of personnel.

Small business owners must fulfill requirements related to:

  • Americans with Disabilities Act requirements
  • Equal Employment requirements
  • Safety requirements
  • Wage and Labor requirements
  • New Hire Reporting
  • Workers' Compensation Insurance reporting
  • Labor Posters placement
  • Other relevant requirements

Common Forms and Fees for Texas Small Businesses

Common Forms and Fees
Filing Type Additional Form(s) Filing Fee ($)
Certificate of fact 15
Expedited processing of a request for a certified copy or certificate of status or fact 10
Certificate of formation for an entity (except nonprofit corporation, cooperative association, PA or LP). 201,203, 205, 206 300
Certificate of formation for a nonprofit corporation 202 25
Certificate of formation for a cooperative association corporation 25
Certificate of formation for a limited liability partnership or LLLP 701, 703 750
Name reservation (120 days) or renewal 501 40
Registration of trademark 901 50 (per class)
Expedited processing of a document submitted for filing (except trademark documents) 25

For a comprehensive list of all forms used to register a business or nonprofit, please see the SoS's compiled list.

For a comprehensive list of all forms used to trademark corporations, please see the SoS's compilation of trademark forms.

For a comprehensive list of report forms, please see the SoS's compiled list.

The SoS has also created a Business Formation FAQ.

Payment Methods

Fees may be paid by:

  • Check (personal or firm checks accepted) or money order payable to the Secretary of State through a U.S. Bank or financial institution
  • Credit card (Credit card payments are subject to an additional statutory convenience fee of 2.7% of amount charged.)
  • LegalEaseSM debit card
  • Prefunded SOS client account
  • Cash (for in-person submissions only)
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