Ready to file the paperwork for your Texas startup?

Everything you need to know about choosing the right entity type for your new Texas business

There are lots of things to consider when getting ready to launch your new Texas startup. Regardless of the entity type you choose for your business, ClickAndInc.com makes starting your business simple and affordable. How do you decide which business type is best for your Texas startup? Perhaps an LLC provides the flexibility you require. Perhaps it would be more beneficial to incorporate in Texas. Perhaps a Texas sole proprietorship is sufficient for your needs. If you’re not sure what type of business to form, the information below and in the following pages should assist you in making an informed decision.

C Corporation in Texas

A C Corporation is a corporation formed by filing Articles of Incorporation at the state level (the “C” status is the default status of a corporation). These Articles will be filed at the state level, with the Corporations Division of the Secretary of State’s office, and your corporation is officially formed once your registration has been accepted and you have been provided with a filing date and filing number. All state business filings are public record.

A C corporation, unlike an S Corporation, may own or be owned by other business entities. It can issue multiple classes of shares—something that also cannot be done with an S Corporation. You may have an unlimited amount of shareholders. The corporation’s income will be taxed through the company, separately from the owners’ individual income taxes.

Learn more about forming and maintaining a Texas C Corporation.

S Corporation in Texas

To form an S Corporation, you would take the same formation steps as a C Corporation—file Articles of Incorporation with the state. Then, once filed, you will fill out the S Corp Election form and file it with the IRS. This is how you gain the “S” status.

An S Corp has more limitations than a C corporation: you cannot have more than 100 shareholders, and none of those shareholders can be a non-US citizen or non-resident alien. Additionally, you may not issue more than one class of stock, and an S Corp cannot own or be owned by another company. However, owners pay income tax themselves and are able to deduct business losses on their individual income tax returns.

Not sure if an S Corp is right for you? Take a look at further information on forming a Texas S Corporation.

LLC in Texas

An LLC is a relatively new entity type—the first state to accept LLCs as taxable entities did so in 1988—and has since grown in popularity due to the best-of-both-worlds characteristics it shares with both corporations and partnerships. What this means to you: an LLC is a pass-through entity, meaning that individuals can report gains and losses on their individual tax returns, avoiding the double-taxation of a C Corporation. They can be owned by US citizens, non-US citizens, or outside business entities, and they can have an unlimited amount of members.

For further information, please take a look at our section on forming a Texas LLC.

Foreign Corporation in Texas

If you’ve already incorporated in another state but now wish to do business in Texas, you may need to form a foreign corporation (or foreign LLC). In order to do so, you must first verify that you’re in good standing in your original state of domestication—this is especially important in Texas, because Texas does not require you to submit proof of your existence and standing in your original state; they only require you to affirm that you are in good standing. The best way to do this is to look up a record of your filing with the Secretary of State.

Once you’ve verified that your corporation or LLC is active and in good standing, you can submit your application for registration of a foreign entity. ClickAndInc.com makes this easy for you—simply review our informational page on filing a Texas Foreign Corporation.

DBA in Texas

The jurisdiction involved with filing your Texas DBA—or doing business as, also known as an Assumed Name—varies based on the structure of the DBA. If you are filing an Assumed Name for your corporation or LLC—or any other type of business that has corporate records on file with the Secretary of State’s office—you will file at the state level; those state records will be modified to include your Assumed Name. Alternatively, if you’re filing as an individual (called a Sole Proprietorship) or as an unincorporated partnership, you will file at the county level only.

Corporations and LLCs, while they do file at the state level, must select at the time of filing the county or counties in which they intend to operate. Sole Proprietorships and unincorporated Partnerships, on the other hand, are required to file in the county in which they are physically located. They cannot arbitrarily select a county. (They are allowed to file in as many counties as they wish, provided that they hold a physical address in each of those counties.) Since the filing is done at the county level, the name will be secured in that county only; filing in additional counties does not tie the county records together in any way.

ClickAndInc.com can take care of your DBA filing for you. We also provide further information on filing a Texas DBA, regardless of the level (state or county) at which your filing will take place.

Nonprofit Corporation in Texas

If you’re forming your business for a scientific, religious, charitable, educational, or literary purpose, you may wish to form a Nonprofit Corporation in Texas. Many people who register a Nonprofit Corporation go on to receive 501c3 status, which allows them to take advantage of important tax and other benefits.

Forming a 501c3 is a process that involves two major components. First, you will organize your Nonprofit Corporation with the Secretary of State of Texas. This allows you to begin conducting business in Texas. The next step is to apply for the 501c3 status with the IRS; once you have been approved, you will be able to accept tax-deductable donations, receive a discount on postage, and the other benefits of a 501c3 Nonprofit Corporation in Texas.