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What is a Texas Corporation?

A corporation is an organization formed to act as an artificial entity or artificial person to carry on or conduct business. A corporation is owned by its shareholders (or stockholders), who are in most circumstances shielded from claims against the business (although there are exceptions to this general concept).  Corporations were once the most common form of business structure, but their popularity in Texas appears to be declining in favor of limited liability companies (LLCs).

The body of common law (appellate judicial decisions) relating to corporations and interpreting corporation statutes in Texas and in other states is comprehensive and substantial. However the common law relating to LLCs and interpreting limited liability company statutes in Texas and in other states is much more meager for this relatively newer entity structure. Although there are special circumstances which may dictate the use of a corporation’s structure, more and more certified public accountants are showing their preference for LLCs because of their flexibility from a tax planning perspective.  Currently the statutory fee payable to the Texas Secretary of State to file the Certificate of Formation for a corporation is $300 plus $25 for that office’s expedited handling fee service.

Input from your certified public accountant on the choice of entity is an absolute must before the entity is organized.  Your CPA knows your tax situation, and his or her counsel more often than not dictates their preference for the choice of your entity. I regularly assist clients in the organization of their Texas corporations.  And the counsel of a Texas attorney is especially critical prior to forming the entity if two or more shareholders will own the corporation.

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