When you want to start a business, thinking about what legal form the business will take is necessary. How you set up a company will affect how you are taxed and what legal liabilities you may face as a business owner.
Many entrepreneurs turn their businesses into corporations to protect themselves from liability, but corporations require approval from the state to exist. When you want to start your business in Texas, a San Antonio corporation formation lawyer could help you file with the state and set up the fundamental documents that will govern your business. Call Begum Peláez-Prada PLLC today to schedule a consultation with a seasoned business formation attorney.
Corporations are legal entities separate from you or other employees, though they act through real people. Because of this legal status, corporations give the owners of a business—often shareholders—limited liability with the permission of the state. Unlike other business forms where owners are responsible for the business’s liabilities, such as a sole proprietorship or a partnership, corporations create a legal buffer between the owners and risk. With limited liability, the corporation itself faces regulatory risk, lawsuits, and bankruptcy—rather than the individuals running it.
A corporation’s status as a separate legal entity can provide a tax disadvantage: corporations are taxed when they bring in revenue, and then individuals can be taxed again when receiving the profits of the business personally. This “double taxation” allows you to choose to become a special type of corporation—an S-Corp—by filing with the U.S. Internal Revenue Service (IRS). S-Corps only get taxed once when owners receive profits, which is also known as “pass-through taxation.”
This requires you to first form your corporation properly. Working with a knowledgeable lawyer experienced in forming businesses could ensure that your company meets all the formation requirements and qualifies as a valid corporation in San Antonio.
State authorities must approve corporation formation to allow limited liability benefits. In Texas, the Secretary of State keeps records of business entities and certifies properly formed corporations. In order to file your company’s documents with the Secretary of State and officially create your corporation, you need to make a few crucial decisions.
Your business name cannot already exist as a Texas corporation. This name does not need to be the one you use publicly, as you can use a fictitious name to do business; it will be your corporation’s legal name and must indicate corporate status, such as by including “Inc.” You can search the Secretary of State’s database to ensure that your name is unique.
A registered agent is a person or entity that will serve as the point of contact for the legal process. The registered agent does not need to be affiliated with your business. For example, a law firm or service provider helping set up your business can usually be your registered agent for a fee.
You must appoint at least one director when forming the corporation. This person or group of people should be trustworthy and aligned with your vision for the business.
After these decisions are made, you can file your business’s Certificate of Formation, which will include:
The Secretary of State will review your documents and certify your corporation within a few weeks by issuing a Certificate of Filing—the legal document confirming that your corporation legally exists.
After filing, you must organize the business, create corporate bylaws, and ratify agreements signed before formation. With the help of a San Antonio corporation formation attorney, you can also elect to make your company an S-Corp at this time.
Starting your business on the right foot is critical to your success. These initial decisions can influence how your business operates going forward. A San Antonio corporation formation lawyer could support you at every step of the process. The insights of our attorneys at Begum Peláez-Prada PLLC could guide you in creating your business to your specifications. Call today to schedule a consultation to discuss your business needs.
