How to File Texas Articles of Incorporation

Your Guide to Incorporating in Texas

Texas articles of incorporation are filed to create a corporation. This guide provides instructions and tips when preparing and filing this legal document.

Overview

Preparing and filing your articles of incorporation is the first step in starting your business or nonprofit corporation. Approval of this document secures your corporate name and creates the legal entity of the corporation. Only after this approval can the corporation apply for tax IDs, obtain business licenses, sign contracts, and otherwise conduct business.

Incorporating provides many important benefits:

• Limits the liability of directors, officers, and shareholders
• Fulfills statutory requirements to register your business’s or organization’s name
• Provides governance and adds credibility to the business or organization

How to Incorporate

The Texas Secretary of State oversees the process of incorporating.

Use the correct forms and instructions for a profit, nonprofit, or professional corporation. A professional corporation may be a for-profit or nonprofit organization and is formed to provide accounting, legal, or other services that require a state license. A Texas professional corporation cannot be formed for the practice of medicine.

As you prepare to file your articles of incorporation, it is important to take time to understand the specific information required on those documents. If the filing is rejected it will add around a month to the process.

State articles of incorporation templates represent the minimum amount of information required by the Secretary of State to provide approval. The top of the Texas forms emphasizes “The attached form is drafted to meet minimal statutory filing requirements pursuant to the relevant code provisions.” The IRS requires certain additional provisions for 501(c)(3) eligibility. State tax exemptions, B-corporation and other certifications, and some banking purposes require additional provisions in the articles.

You have three options to prepare and file your articles of incorporation. You can do it yourself, hire an attorney, or hire a professional document preparation and filing service such as us. Investing in the expense of an attorney is recommended if your corporation will have complex ownership arrangements (i.e., if there are many parties involved with varying rights and protections).

Profit Corporations (Business Corporations)

Profit corporations, for-profit professional corporations, and close corporations

How to File Articles of Incorporation for a Profit Corporation

Texas profit articles of incorporation include the following information. Differences for for-profit professional and close corporations are noted. Note that some information is optional.

1

Entity Name and Type

The name of your corporation must be distinguishable from all other registered entities in Texas (including other corporations, LLCs, and LPs). Conduct a thorough name availability check before filing your articles of incorporation. Business names must include a corporate suffix such as “corporation”, “incorporated”, “company”, “limited”, or a similar abbreviation. Names of professional corporations also have the option of using the suffix “professional corporation” or a similar abbreviation. Some Texas state licensing boards have additional restrictions on the corporate name. The Texas Secretary of State warns “...the issuance of a certificate of formation under a name does not authorize the use of a name in violation of another person’s rights to the name.” This means that state approval is separate from your responsibility to avoid trademark infringement.

2

Registered Agent and Registered Office

You are required to declare your registered agent and office on your Texas articles of incorporation. The registered agent is the individual or company that will receive any process, notice, or demand served upon the business (e.g. notice of a lawsuit). The registered agent is responsible for being located at the registered office address during normal business hours, signing for documents, and promptly relaying them to the appropriate corporate personnel. You may declare any Texas resident and their physical Texas street address (not a mailbox service) or hire a registered agent service. Your corporation cannot name itself as its own registered agent. If you have a home office, are regularly out of the office, or wish to have added privacy of keeping your address off the public record, then using a registered agent service may be in your interest. In Texas, the registered agent must sign an electronic or written statement accepting the designation, but this statement is not filed as part of the articles of incorporation.

3

Directors

First determine if your corporation will be managed by a board of directors or pursuant to a shareholders’ agreement. Most corporations elect a board of directors.

• Board of directors: Directors are the individuals elected by the shareholders to oversee the management of the corporation. The board of directors elects corporate officers to run the day-to-day operations. Include the names and addresses of the initial directors. These may be replaced at the first annual shareholders’ meeting or when successors are otherwise elected and qualified. Your corporation must have at least one director. Directors must be natural persons, not companies. There are no residency requirements for directors. When stating each director’s name, do not use prefixes or suffixes except titles of lineage (e.g. Jr., Sr., III). When stating each director’s address, remember that the articles of incorporation will become public record, so consider listing a business or P.O. box address instead of a residence.
• Pursuant to a shareholders’ agreement: State the name and address of each person who will perform the functions required of the Board of Directors by the Texas Business Organizations Code.

4

Authorized Shares & Par Value

Shares represent ownership interest in the corporation. ShareholdersA shareholder is an individual who owns shares (stock) in the corporation. Owning stock gives the shareholder the right to vote in company matters such as electing the board of directors and authorizing mergers. hold shares in anticipation of profit such as an annual dividend or a net gain when they sell their shares at a margin. The articles of incorporation must contain several declarations regarding shares:

• State the aggregate number of shares the corporation is authorized to issue. You do not have to issue all shares authorized, that way you have the flexibility to add more shareholders at a later date. In the example of a corporation with three owners, you may authorize 1,000 shares and issue 250 shares to each owner (750 shares issued). This leaves 250 shares to issue to future investors or partners. The corporation may later change the amount of shares authorized by filing an amendment to the articles of incorporation.
• Determine if the shares are to have a stated par value or if the shares will be without a stated par value. “Par value” means the stated dollar amount per share. For example, if the par value is $2/share then the corporation should receive $200 when it sells 100 shares of stock to an investor. Either:
  • Declare the par value per share. Do not list a $0 par value if the shares are to be without a stated par value. OR
  • Declare that the shares are to be without a stated par value. These shares will be issued for an amount of consideration determined by the board of directors.
• For-profit and professional corporations may choose to issue more than one class of shares (e.g. Class A, Class B). Texas articles of incorporation must then state for each class: its designation; the aggregate number of shares authorized; the par value or a statement that each share is without par value; and the preferences, limitations, and relative rights of the shares.
• Finally, if classes of shares consist of more than one series, the articles of incorporation must detail for each series: its designation; the aggregate number of shares authorized; any preferences, limitations, and relative rights of the shares to the extent provided in the certificate of formation; and any authority vested in the board of directors to establish the series and set and determine the preferences, limitations, and relative rights of the series.

5

Purpose of the corporation

Texas permits a general declaration of purpose such as “The purpose for which the corporation is formed is for the transaction of any and all lawful business for which a for-profit corporation may be organized under the Texas Business Organizations Code.” Alternatively, you may declare a more specific purpose or purposes; your articles will be approved so long as the purpose is lawful. Professional corporations must specifically state that the professional entity is a professional corporation and the type of professional service to be provided. A close corporation must state “This corporation is a close corporation.”

6

Effective Date

By default, the corporation will become effective when the Texas Secretary of State files the articles of incorporation. Alternatively, you may declare a future effective date up to 90 days from the date the organizer signs the articles of incorporation. Instead of a specific date, you may declare a delayed effective date conditional on some event or fact. If using this last option, you must file a subsequent statement with the Secretary of State when this occurs and this filing must be within 90 days of of the signing of the articles.

7

Organizer

In Texas, only one organizer is required. This individual is responsible for executing the articles of incorporation. The function of the organizer usually ends after the documents are filed. The organizer may be a natural adult person of at least 18 years of age or a legal entity, such as a corporation. There are no residency requirements for an organizer. The organizer must provide their name, address, and dated signature. In Texas, the signature block for the organizer contains unique language, compared to other states, affirming that the designated registered agent has consented to the appointment. The organizer can face penalties for fraudulently executing the articles.

*

Other Provisions/Information

You may choose to include statements that provide more information about your company. Be aware that any information you include will become part of public record.

• By default, the corporation exists perpetually. If desired, you may form a corporation with a stated limited period of duration.
• Additional optional provisions for professional and close corporations can be found in the Texas statutes.
• Obtaining certain licenses, tax statuses, or other government classifications sometimes requires other provisions listed on your articles of incorporation.

In many states, legislation is being considered and passed to allow a new type of corporation called a benefit corporation. B-corporations are certified to meet rigorous standards of social and environmental performance, accountability, and transparency. As of the writing of this article in July 2013, B-Corps are not yet part of the Texas corporate statutes. If your business would consider this, check the latest legislation because typically B-Corps are required to include additional provisions or supplements with their articles of incorporation.

How to Elect S-Corporation Status

S-Corporation is not a type of corporation as much as a tax election. By default, your corporation will receive tax treatment as a C-Corporation. Many small businesses elect S-Corporation tax treatment.

• Electing Subchapter S status helps shareholders avoid the double taxation that applies to traditional C-Corporations.
• S-Corps can also help the owners avoid paying the 15.3% Self-Employment Tax (Social Security and Medicare) on distributions.

Corporations must file form IRS-2553 within 75 calendar days of incorporation to be taxed as an S-Corp. Check with your state’s Department of Revenue if they will automatically recognize your federal IRS tax election or if you need to make an additional application or notification.

Nonprofit Corporations

Nonprofit corporations and nonprofit professional corporations

How to File Articles of Incorporation for a Nonprofit Corporation

You can form a Texas nonprofit corporation by filing the articles of incorporation forms intended for a nonprofit. Corporations formed for the purpose of operating a nonprofit institution, including an institution devoted to a charitable, benevolent, religious, patriotic, civic, cultural, missionary, education, scientific, social, fraternal, athletic, or aesthetic purpose, must be formed and governed as a nonprofit corporation, not as a for-profit corporation.

If you wish to form a nonprofit professional corporation, file the articles of incorporation forms designated for professional corporation. Nonprofit corporations may not be formed for the practice of medicine.

Nonprofit articles must contain the following information:

1

Entity Name and Type

The name of your corporation must be distinguishable from all other registered entities in Texas (including other corporations, LLCs, and LPs). Conduct a thorough name availability check before filing your articles of incorporation. Using a corporate suffix is optional. Corporate suffixes include “corporation”, “incorporated”, “company”, “limited”, or a similar abbreviation. Names of professional nonprofit corporations also have the option of using the suffix “professional corporation” or a similar abbreviation. Some Texas state licensing boards have additional restrictions on the corporate name. The Texas Secretary of State warns “...the issuance of a certificate of formation under a name does not authorize the use of a name in violation of another person’s rights to the name.” This means that state approval is separate from your responsibilities to ensure you are not infringing on a trademark.

2

Registered Agent and Registered Office

You are required to declare your registered agent and office on your Texas articles of incorporation. The registered agent is the individual or company that will receive any process, notice, or demand served upon the business (e.g. notice of a lawsuit). The registered agent is responsible for being located at the registered office address during normal business hours, signing for documents, and promptly relaying them to the appropriate corporate personnel. You may declare any Texas resident and their physical Texas street address (not a mailbox service) or hire a registered agent service. Your corporation cannot name itself as its own registered agent. If you have a home office, are regularly out of the office, or wish to have added privacy of keeping your address off the public record, then using a registered agent service may be in your interest. In Texas, the registered agent must sign an electronic or written statement accepting the designation, but this statement is not filed as part of the articles of incorporation.

3

Management

Determine if your corporation will be managed by a board of directors or managed by members. Unless otherwise stated in the articles of incorporation, by default the nonprofit is considered to have vested its management in a board of directors.

• Board of directors: Directors are the individuals elected by the members to oversee the management of the corporation. The board of directors elects corporate officers to run the day-to-day operations. Your board of directors may be called by another name according to the customs, tenets, or usages of the corporation. Include the names and addresses of the initial directors in the articles of incorporation. Your nonprofit corporation must have at least three directors. Directors must be natural persons, not companies. Directors may or may not also be members of the corporation. There are no residency requirements for directors. When stating each director’s name, do not use prefixes or suffixes except titles of lineage (e.g. Jr., Sr., III). When stating each director’s address, remember that the articles of incorporation will become public record, so consider listing a business or P.O. box address instead of a residence.
• Managed by members: To make this election, state that the management of the affairs of the corporation is to be vested in the nonprofit corporation’s members.

4

Members

A nonprofit may choose whether or not to have members. Members elect the board of directors (if applicable) and provide a layer of oversight that is important to many nonprofits, especially larger ones. Having members comes with added complexity in management, recordkeeping, and maintenance.

You should indicate whether or not your nonprofit has members. Obviously, if you indicated that the corporation will be managed by members, then you must state in this section that the corporation will have members.

5

Purpose of the nonprofit corporation

Texas permits a general declaration of purpose such as “any and all lawful purposes.” Alternatively, you may declare a more specific purpose or purposes; your articles will be approved so long as the purpose is lawful. Professional corporations must specifically state that the entity is a professional corporation and the type of professional service to be provided. While the Texas Business Organizations Code allows formation with a general purpose, the Texas Tax Code and the Internal Revenue Code may require that the certificate of formation include a more specific purpose statement as a basis for granting a license or a tax-exempt or tax-deductible status.

6

Effective Date

By default, the corporation will become effective when the Texas Secretary of State files the articles of incorporation. Alternatively, you may declare a future effective date up to 90 days from the date the organizer signs the articles of incorporation. Instead of a specific date, you may declare a delayed effective date conditional on some event or fact. If using this last option, you must file a subsequent statement with the Secretary of State when this occurs and this filing must be within 90 days of of the signing of the articles.

7

Organizer

In Texas, only one organizer is required. This individual is responsible for executing the articles of incorporation. The function of the organizer usually ends after the documents are filed. The organizer may be a natural adult person of at least 18 years of age or a legal entity, such as a corporation. There are no residency requirements for an organizer. The organizer must provide their name, address, and dated signature. In Texas, the signature block for the organizer contains unique language, compared to other states, affirming that the designated registered agent has consented to the appointment. The organizer can face penalties for fraudulently executing the articles.

*

Other Provisions/Information

You may choose to include statements that provide more information about your company. Be aware that any information you include will become part of public record.

• If you are looking to become a 501(c)(3) tax exempt organization, you will need to include statements required by the IRS. These statements are to the effect of the following:
  • The corporation is not for profit
  • It will not engage in prohibited political or legislative activity listed in 501(c)(3)
  • If dissolved, it will distribute its assets in compliance with 501(c)(3)
• Similarly, tax exemption under the Texas Tax Code requires additional language in your articles of incorporation. It is best to research and use the exact language required by your tax-exemption or tax-deductible application. Nonprofits that wish to apply for tax exemptions in more than one states may also wish to research and include the statements required by the governing agencies.
• By default, the corporation exists perpetually. You may optionally form a corporation with a stated limited period of duration.
• Additional optional provisions for professional corporations can be found in the Texas statutes.
• The Texas Business Organizations Code §22.304 outlines the manner of distribution of property of the corporation. In a nonprofit corporation, no part of the income of the corporation may be distributed to a member, director or officer of the corporation. Deviations from the statutory procedures of distribution must be declared in the articles of incorporation.
• Obtaining certain licenses, tax statuses, or other government classifications sometimes requires other provisions listed on your articles of incorporation. Check with the corresponding governing board or agency.

How to Register for 501(c)(3), Fundraising, and State Tax Exemption

501(c)(3) Federal income tax exemption

Nonprofits may choose to apply for federal income tax exemption. 501(c)(3) recognition also allows donors to make tax deductible contributions. The IRS published rev-557, an informational resource on how to obtain tax exempt status for a nonprofit organization. 501(c)(3) is perhaps the most common and well-known tax exemption category for charitable organizations, however the internal revenue code has exemption categories for many other types of nonprofits organizations. Incorporating the nonprofit and obtaining a Federal Tax ID (EIN) are precursors to applying for 501(c)(3) recognition.

State tax exemptions

501(c)(3) recognition provides income tax exemption on federal taxes. Your state may have additional applications or processes for obtaining state tax exemptions for the corporation. Consider applying for exemptions in each state where the nonprofit will conduct activities. See the Texas Comptroller publication 96-1045 Guidelines to Texas Tax Exemptions.

State fundraising registration

Some aspects of fundraising are regulated by state government. Nonprofits that solicit funds may need to submit registrations with the department of state or revenue in each state where they solicit residents. Be sure to check the procedures for obtaining the authority to solicit, employee solicitors, or otherwise engage in fundraising in each state where you raise funds.

Additional Requirements for Texas Corporations

Texas Does Not Have a Publishing Requirement

In some states, corporations are required to publish notice of their intention to or their filing of the articles of incorporation. This is not the case in Texas.

Texas Articles of Incorporation Submission Tips

As you get ready to submit your articles, keep in mind these pointers:

• Submit the completed articles of incorporation in duplicate.
• Include filing fees: $300 for a profit or professional corporation or $25 for other nonprofit corporations.
• Preclearance and expedited filing services are available from the Texas Secretary of State. Fees range from $10 - $50. Requests for these services should be specified on a cover sheet.

Texas Taxes

Texas has a reputation for its generosity when it comes to personal income taxes (there are none) and shifting the tax burden onto businesses. All corporations are subject to a state franchise tax. Nonprofits may apply for tax exemptions.

Texas Nonprofit Periodic Reports

Texas nonprofits must file periodic reports every four years. A reminder will be sent to the registered agent. Failure to file can result in involuntary dissolution of the corporation.

Texas Nonprofit Information for Public Inspection

Texas nonprofits must have certain records available for public inspection. Records, books, and annual reports of the corporation’s financial activity must be available at the registered office or principal office for three years following the close of each fiscal year. The public may inspect and copy these documents during business hours. The nonprofit may charge a reasonable fee for copying. Some nonprofits are exempt from this requirement.

Register for Federal Taxes, State Taxes, & Licenses/Permits

After you file your articles of incorporation, you will apply for a Federal Tax ID (EIN), a unique nine-digit number assigned by the IRS to identify your business. State tax registration requirements vary, but the most common registrations are for sales tax and employer taxes. You may also need to get local licenses or permits.

Hold an Organization Meeting & Establish Records

Once the registration process is complete, you should hold an organizational meeting of the incorporators and take minutes of that meeting. At that time, you will ratify corporate bylaws, adopt a shareholders agreement, issue stock certificates and complete a stock ledger, elect directors and officers, and anything else you may want to include. Consider purchasing our corporate kit that stores your documents and contains your corporate seal and stock certificates.

Ongoing Compliance Requirements

Ongoing requirements include annual meetings with minutes, special meetings to make important business decisions, maintaining a registered office, amending your articles of incorporation as needed, and more. For more information on business compliance action items, please consult your Harbor Compliance representative.