Form a S-Corp in Texas
Everything you need to know about forming a 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 business name that includes a required designator such as 'Corporation,' 'Incorporated,' 'Company,' or an abbreviation (Corp., Inc., Co.). Verify name availability using the Texas Secretary of State's SOSDirect name search tool.
30 minutes
Appoint a Registered Agent
Designate a registered agent with a physical street address in Texas (P.O. boxes are not permitted) who is available during normal business hours to receive legal and official documents on behalf of the corporation. The agent can be an individual Texas resident or a registered business entity authorized to do business in Texas.
1-2 hours
File Certificate of Formation (Form 201)
Complete and submit Texas Form 201 (Certificate of Formation – For-Profit Corporation) with the Texas Secretary of State online via SOSDirect, by mail, or in person. The filing must include the corporation's name, registered agent information, directors, organizer signature, and the par value and number of authorized shares.
1-2 hours
Create Corporate Bylaws
Draft corporate bylaws that govern the internal management of the corporation, including rules for shareholder meetings, board of directors structure, officer roles, and voting procedures. While not filed with the state, bylaws are required for proper corporate governance and should be adopted at the initial 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 and Issue Stock — Convene the initial board of directors meeting to adopt bylaws, appoint officers, approve the issuance of stock, and address other organizational matters. Issue stock certificates to shareholders, ensuring the total number of shareholders does not exceed 100 to maintain S-Corp eligibility.
- •Obtain EIN and Elect S-Corporation Status — Obtain 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-Corporation tax status; all shareholders must sign the form and it must be filed no later than 2 months and 15 days after the beginning of the tax year the election is to take effect.
- •Register for Texas State Taxes and Obtain Licenses — Register with the Texas Comptroller of Public Accounts for applicable state taxes, including sales tax if selling taxable goods or services, and obtain any required local or industry-specific business licenses or permits. File an initial franchise tax report as required by the Texas Comptroller.
Advantages
- ✓Pass-through taxation avoids double taxation — profits and losses flow directly to shareholders' personal tax returns, and Texas has no state individual income tax, maximizing tax efficiency
- ✓Shareholders who are active employees can reduce self-employment taxes by splitting income between reasonable salary and distributions, potentially saving thousands annually in FICA taxes
- ✓Texas imposes no state income tax on S-Corp earnings at the entity level, and qualifying small S-Corps may owe no franchise tax if revenue falls below the $2.47 million threshold
- ✓Provides limited liability protection, shielding shareholders' personal assets from business debts and legal judgments while maintaining a credible, formal corporate structure
Considerations
- •Strict IRS eligibility requirements limit S-Corps to 100 shareholders, one class of stock, and only U.S. citizens or resident aliens as shareholders, restricting growth and investment flexibility
- •S-Corps require significantly more administrative formality than LLCs, including maintaining bylaws, holding annual shareholder and director meetings, recording minutes, and adhering to corporate governance rules
- •Owner-employees must receive a 'reasonable salary' subject to payroll taxes before taking distributions, adding payroll administration complexity and costs compared to simpler pass-through structures like sole proprietorships or partnerships
Annual Obligations
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