Texas Corporations
Corporations are generally divided into two (2) types of entities: the C Corporation and the S Corporation. Each of these entities is required to make a filing with the Secretary of State of Texas and to pay the necessary fees to the Secretary of State of Texas. The difference between these entities is a filing with the Internal Revenue Service, which allows the S Corporation to pass its earnings to the owners of the corporation as ordinary income.
Filing with the Secretary of State of Texas
A Texas corporation must file its certificate with the Secretary of State of Texas and pay the related fees to the Secretary of State of Texas. It must then take the necessary steps to complete the formation of the corporation as required by the Texas Business Organizations Code.The Texas corporation (whether C Corporation or S Corporation) is the entity that has been most commonly used by individuals in the past and it is the one with which the courts are most familiar because of its history. It consists of three tiers of individuals: the shareholders who own the corporation, the board of directors who manage the corporation and the officers and agents who perform the day-to-day tasks of the corporation. A properly formed corporation requires proper documents, proper funding, and proper documentation of these events. The advantages associated with this type of entity are the familiarity of the courts with the type of entity and additional employment benefits. The disadvantages of this type of entity are its rigidity in management and double taxation. It is not frequently used by small businesses (without the filing of the S Election).