Form an S-Corp in Texas
Everything you need to know about forming an S-Corp in Texas. Filing fees, requirements, timeline, and step-by-step guidance.
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How to File
Choose a Corporate Name
Select a unique name that includes 'Corporation,' 'Incorporated,' 'Company,' or an abbreviation (Corp., Inc., Co.). Conduct a name availability search on the Texas Secretary of State SOSDirect portal to confirm the name is not already in use.
30 minutes
Appoint a Registered Agent
Designate a registered agent with a physical street address in Texas — this can be an individual resident or a registered commercial agent service. The registered agent must be available during normal business hours to receive legal and state correspondence.
1-2 hours
File Certificate of Formation
Complete and submit Form 201 (Certificate of Formation – For-Profit Corporation) to the Texas Secretary of State by mail, in person, fax, or online via SOSDirect, along with the $300 filing fee. The form requires director and officer information, share structure, and registered agent details.
1-2 hours
Draft Corporate Bylaws
Prepare internal corporate bylaws that govern how the corporation will operate, including rules for shareholder meetings, director responsibilities, officer roles, and voting procedures. Although not filed with the state, bylaws are legally important and should be adopted at your organizational meeting.
2-4 hours
What's Next After Filing
Once your S-Corp is officially formed, you'll want to complete these important steps:
- •Hold Organizational Meeting & Issue Stock — Hold the initial board of directors meeting to adopt bylaws, appoint officers, authorize shares, and complete other organizational formalities. Issue stock certificates to initial shareholders, keeping in mind the IRS S-Corp limit of no more than 100 shareholders.
- •Obtain EIN and File IRS Form 2553 — Apply for a Federal Employer Identification Number (EIN) from the IRS at no cost via IRS.gov. Then file IRS Form 2553 (Election by a Small Business Corporation) to elect S-Corp tax status — this must be filed within 75 days of formation or by March 15 for the election to apply to the current tax year.
- •Register for Texas State Taxes & Obtain Licenses — Register with the Texas Comptroller of Public Accounts for applicable state taxes, including sales and use tax if applicable, and obtain any required local or industry-specific business licenses or permits. Ensure compliance with Texas franchise tax reporting requirements.
Advantages
- ✓Pass-through taxation avoids double taxation — profits and losses flow directly to shareholders' personal tax returns, and Texas has no state income tax, maximizing this benefit.
- ✓Shareholders who are active in the business may reduce self-employment taxes by receiving a reasonable salary plus distributions, with only the salary portion subject to payroll taxes.
- ✓Provides strong personal liability protection, shielding shareholders' personal assets from business debts and legal judgments.
- ✓Texas imposes no traditional annual report fee and has a generous franchise tax exemption threshold (~$2.47M in revenue), keeping ongoing compliance costs low.
Considerations
- •S-Corp status imposes strict IRS eligibility restrictions: no more than 100 shareholders, only one class of stock, and shareholders must be U.S. citizens or permanent residents — limiting flexibility for growth and investment.
- •Corporate formalities such as holding annual shareholder and director meetings, maintaining minutes, and following bylaws are legally required and more burdensome than operating an LLC.
- •The IRS requires S-Corp shareholder-employees to pay themselves a 'reasonable salary,' which is subject to payroll taxes and adds complexity and cost to payroll administration.
Annual Obligations
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