A corporation is a legal entity that is granted a charter recognizing it as a separate legal entity having its own privileges, and liabilities distinct from those of its shareholders. When it is formed it becomes a separate entity from the people who own the stock of the corporation. For this reason, a corporation’s actions are made by the corporation and not by an individual person. This legal distinction is what separates the liability of the Texas corporation from the individual and is a major consideration in deciding to form a corporation.
Anyone can form a corporation in Texas. A corporation can form another corporation. Once the corporation is formed, the entity formed is responsible for all actions done in the corporate name. The new entity is required to file state and federal taxes and acquire any licenses to do business in the name of the corporation. The corporation can purchase insurance, own real estate and cars and other assets or personal property as if were a natural person. It is responsible for actions both good and bad done in its name. If a corporation fails, shareholders normally only stand to lose their investment, and employees will lose their jobs, but neither will be further liable for debts that remain owing to the corporation’s creditors.
Corporations can exercise human rights against real individuals and the state, and they may be responsible for human rights violations. There are five core characteristics of a business corporation:
•Legal personality
•Limited liability
•Transferable shares
•Centralized management under a board structure
•Shared ownership by contributors of capital
Generally, the corporation files articles of incorporation with the government, laying out the general nature of the corporation, the amount of stock it is authorized to issue, and the names and addresses of directors. Once the articles are approved, the corporation’s directors meet to create bylaws that govern the internal functions of the corporation, such as meeting the procedures and officer positions.
•Some of the advantages of a corporation are as follows:
•Shareholders have limited liability for the corporation’s debts or judgments against the corporation.
•Generally, shareholders can only be held accountable for their investment in stock of the company.
•A Texas corporation may deduct the cost of benefits it provides to officers and employees.
•A corporation pays 15% federal income tax on taxable income up to $50,000; 25% tax on income from $50,001 – $75,000; 34% tax on income from $57,001 – $100,000; 39% tax on income from $100,001 – $335,000; and 34$ tax on income over $335,001
There are some disadvantages to a corporation. The process of incorporating a business in Texas may require more time and money than other forms of organizations and the corporation may be monitored by federal, state and some local agencies and as a result require have more paperwork to properly comply with regulations. Incorporating may also result in higher overall taxes in some circumstances.
For answers to your questions on forming a business corporation in Texas, contact Dallas business attorney Mark Nacol with the Nacol Law Firm, P.C.
