Texas Incorporation FAQ - United States

Texas Incorporation FAQ - United States Texas Incorporation FAQ - United States DefinitionsCan I complete the incorporation process by myself, without using LawDepot? Yes, you can incorporate without the assistance of LawDepot.com. The Texas Secretary of State will allow you to electronically register your incorporation, but you will need to request a SOSDirect Account in order to submit any filings. If you don't want to create an account, you can deliver, fax or mail your completed Certificate of Formation (Form 201) in dupulicate with the filing fees. However, you will not likely receive assistance from the Government: in determining which documents need to be completed; in preparing your Certificate of Formation, and additional forms that are necessary for the incorporation process; with completing the corporate name search process; and in reviewing your information for mistakes. With LawDepot.com's Texas Incorporation Package your incorporation is: Quick So long as there are no problems with your chosen corporate name(s), your incorporation should be complete within 2-5 business days. Easy - with comprehensive customer support via e-mail and phone; Affordable just $99 plus state fees; and Accurate - your information is reviewed for consistency and accuracy where possible. We review your submitted answers for accuracy of grammar, spelling, and completeness. We do not offer legal reviews or legal advice. If you require advice on whether you should and how to incorporate your business, please consult with a local attorney in your area. How does LawDepot protect privacy and provide leading web security? LawDepot maintains the security of your information at all times. We use the Secure Socket Layer (SSL) protocol with 128-bit encryption strength to transmit sensitive information. This is the same technology used in transmitting sensitive information by banks, governments, and online businesses such as Amazon.com and eBay. Once information is in our system, it is accessible to authorized LawDepot personnel only. We strictly enforce our privacy policies with our employees and any breach of this policy will result in termination and possible criminal prosecution. For more information please review: www.lawdepot.com/privacy.php. Can I make changes to my incorporation once I have ordered? Once LawDepot reviews your order, it will be submitted for registration within 1 business day. If you need to change your order, please immediately contact LawDepot technical support by telephone, 1-866-608-1020 (toll-free North America). We will make best efforts to stop your order, but all orders should be considered final. Does LawDepot review my submitted answers for accuracy? Yes, LawDepot does review submitted answers for accuracy of spelling, grammar, completeness and consistency. LawDepot does not check, nor offer reviews of legal completeness, accuracy or offer legal advice of any nature. If you require advice on whether you should and how to incorporate your business, please consult with a local attorney in your area. How long will my registration take? We will file your incorporation package as soon as possible. On average, your Texas Registration should take 2-5 business days. Corporations What is a corporation? A corporation is a business entity considered to be a legal person that is distinct from the shareholders who own it. A corporation can borrow money, pay taxes, hire employees, commence or be subject to a lawsuit, and own property. The shareholders may participate in the corporate profits through the payment of dividends. What are the advantages and disadvantages of a corporation when compared to other business entities? The biggest advantage of an incorporation is limited liability for shareholders. Under law, a corporation is considered to be a legal person that is distinct from the shareholders who own it. This means that individual shareholders are not personally liable for the debts and obligations of the corporation. If a corporation fails, the shareholders will lose the amount of equity invested with their shares. One disadvantage of a corporation is that income is taxed at two levels: first on income for the corporate entity, and then at the shareholder level where shareholders are taxed on any dividends they have received. Can I use LawDepots Incorporation Package to start a non-profit society or charity? LawDepots Texas Incorporation Package is currently restricted to for-profit businesses seeking to incorporate with the Government of Texas. Contact PersonWho is the contact person? A contact person is a person who authorizes registration of this corporation. The contact person may be contacted by LawDepot staff, Registry Agents, the Government of Texas, or the IRS if additional details are required regarding this incorporation. Corporate NameWhat are the corporate naming requirements of the state of Texas? A Corporate Name: Must contain one of the following suffixes: corporation, incorporated, limited or company. Abbreviated versions such as Corp. are also acceptable. May not contain language that states or implies that the corporation is organized for a purpose other than that permitted by the State of Texas or its certificate of formation. May not contain language that states or implies that the corporation is connected with a state or federal government agency or a corporation chartered under the laws of the United States. Must be distinguishable from the names of all other entities or filings organized, registered, or revised under the laws of Texas. What elements should I include in my Corporate Name? A Corporate name should ideally consist of three parts: A distinctive element, i.e. XYZ. A term that describes the business dealings of the corporation, i.e. Distribution. Your choice of suffix, i.e. Inc. In the above example, the corporations name would be XYZ Distribution Inc. While there are marketing and trademark advantages that the name contain a distinctive element and describe the business dealings of the Corporation, there is no legal requirement for either. What difference must exist for a name to be unique? Every corporate name must be unique. The Government of Texas will not allow you to register a corporate name that is identical or confusingly similar to the name of another corporation, limited partnership or LLC. A corporate name is not unique if it is different from another corporate name merely due to: The addition or deletion of punctuation marks or spaces, The insertion or removal of a year in the name, The substitution of a word for its abbreviation or an abbreviation for its word, The substitution of a word for its homonym (a word that sounds identical), The addition or deletion of an article (the, a, etc.), The addition or deletion of the phrase of Texas, A difference in suffix (Miracle Snacks Incorporated would not be considered different from Miracle Snacks Company), or Any other change that does not produce a phonetic difference between the names. For example, the name The E-Z Heating Shop Inc. would not be considered distinct from the name Easy Heating Shop Corporation. What happens if the name I choose is already registered? LawDepot will search the names you have provided to determine whether they are available for registration. If your first choice is not available, we will search your second choice, and so forth. If none of the names you provided are available, we will alert you by email and ask you for an alternate name or names. Can I reserve a corporate name in Texas before incorporating? Unfortunately, you cannot reserve a corporate name in Texas without incorporating. However, LawDepot will search your corporate name of choice to ensure that it is available to be registered before filing your Certificate of Formation with the State of Texas. Is a Corporate Name the same as a Trademark? No a corporate name is not a trademark. A trademark is a distinctive sign, design or logo that distinguishes goods, wares, and services from those of competitors. While a corporate name may become a trademark through application or use, its registration alone does not establish a trademark. Is my Corporate Name registered throughout the world or just Texas? Your Corporate Name will be registered with the Government of Texas. Corporate Address What is a principal business address? A corporations principal business address is usually the place of business where the corporation is located and which is ordinarily available to the public. It doesn't have to be an office of the corporation, but a copy of the records of the corporation (articles of incorporation and bylaws, with amendments, unanimous shareholder agreement, minutes, copies of financial statements, etc.) must be available there. The address can not be a post office box. Shares What is a Share? A share of stock is an ownership unit for a corporation. Shares are sold in exchange for cash or other considerations in order to raise capital to start or expand the corporation. There must be at least one class of share issued. Different classes of shares may be assigned different privileges such as right to vote on management issues as well as the right to participate in the sale of assets if the corporation is dissolved. What is a Shareholder? A shareholder is a person, business entity or institution that owns at least one share in a corporation. Shareholders are the actual owners of the corporation. As owners, the shareholders have the potential to profit if the corporation is doing well but also the potential to lose their investments if the corporations fortunes decline. A shareholder is not personally liable for the debts and obligations of the corporation. You can choose to list all, some, or none of the initial shareholders on the Incorporation form. How many shares should initially be issued? You are only required to issue a minimum of 1 share. Depending on your circumstances, you can issue 1 share or 1,000,000 plus shares. However, be aware that you cannot sell more shares than you have been authorized to issue. If you wish to sell more shares than you have been authorized to issue, you will have to file an amendment to your Certificate of Formation. TerminologyWhat is an Organizer? The organizer is the person or persons who organize the corporation and file the Certificate of Formation. Once the filing is complete the organizer's function is complete and afterwards the management of the corporation is performed by the directors, subject to ratification by the shareholders. What is a Director? A director is a person who is elected by either the incorporators or the shareholders of a corporation to conduct the affairs of the company. You must list at least one director on the Incorporation form. What are the qualifications of Directors? Directors must be natural persons who are at least 18 years of age. Directors do not need to be residents of Texas or shareholders of the corporation, unless the certificate of formation or corporate bylaws so require. The certificate of formation and/or corporate bylaws can set additional requirements for directors. What is an Officer? An Officer is someone who ordinarily works in the management functions of the corporation. An Officer does not need to be a Shareholder or Director, and is appointed and reports to the Directors of a corporation. You can choose to list officers on the incorporation form, but you do not need to do so. Can a Director be an Officer? Yes, a director can be appointed to any office of the corporation. Can a person be appointed to more than one office? Yes, one person can hold two or more offices of the corporation. What are common Officer Titles? Typically officers in a corporation will have such titles as: President, Vice-President, Treasurer, and Secretary. Larger corporations may have a management structure that includes offices such as: Chief Executive Officer, Chief Financial Officer, and Chief Legal Officer. What is a President? A president is an executive officer of a corporation and is usually responsible for the day-to-day operations of the corporation. The president will report to the board of directors. What is a Treasurer? A treasurer is an executive officer of a corporation responsible for supervising the accounting functions of the corporation and for keeping accurate and current financial records for the corporation. What is a Secretary? A secretary is an executive officer of a corporation who is responsible for maintaining records of the corporation such as minutes of meetings, shareholders lists, etc. What is the Incorporation Date? The incorporation date is the date that the contact person authorizes the filing of this Corporation. Typically, it is today's date unless there is some specific reason for wanting the corporation to not exist until a certain day in the future. What is the Certificate of Formation? The Certificate of Formation is a document that is filed by the individuals organizing the corporation. The Certificate of Formation describe the purpose of the corporation as well as the share structure. The Certificate also lists the names of the individuals who are acting as initial directors for the corporation. Details of share transfer restrictions, and business activities may also be included in the Certificate of Formation. The actual rules governing the management of the corporation would be contained in a separate document called the Corporate Bylaws. What are Corporate Bylaws? The Corporate Bylaws describe the internal rules governing the management of the corporation. Bylaws describe the duties and obligations of the directors and officers and govern how the corporation will be run. What is an S-Corporation? An S-Corporation is a corporation that avoids double taxation due to special tax status. This special tax status allows the corporation to be taxed as if it was a sole proprietorship or partnership. In order for a corporation to apply for S-Corporation status, it must meet the following requirements: The corporation must be domestic. The corporation cannot have more than 100 shareholders. Shareholders must be US citizens or residents. Generally, shareholders must be physical entities (persons). However, there are exceptions as certain tax-exempt corporations are permitted to hold shares. The corporation can only have one class of stock. Profits and losses need to be allocated to shareholders proportionately to each ones business interest. What is a Shareholder Agreement? A Shareholder Agreement can be used to say how a corporation will be managed, how disputes will be resolved, what will happen on the death of a shareholder, and to prevent shareholders from competing with the corporation.