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Texas Corporation |
Texas Corporation - Articles of incorporation become effective as of the date of filing by the secretary of state. However, pursuant to Article 10.03 of the Texas Business Corporation Act, the effectiveness of the articles of incorporation may be delayed as of a date not more than ninety (90) days from the date of filing with the secretary of state. Please note that upon the filing of a document with a delayed effective date, the computer records of the secretary of state will be changed to show the filing of the document, the date of the filing, and the future date on which the document will be effective. In addition, at the time of such filing, the status of the entity will be shown as active on the records of the secretary of state.
Should I form a Texas Corporation?
Starting a business involves risk, the risk that the business may either succeed or fail. The upside is hugh, financial freedom and time freedom; independence; unlimited earning potential. The downside is equally steep, potential financial ruin if you've staked everything you own on your business's ultimate success and thrown your career out the window. If you're running your business as a sole proprietorship or a general partnership, everything you own is on the line.There's a lot that can go right and wrong in a business. A lot of it out of your control. But the extent of your personal financial liability for what goes wrong is one thing you can and should control.
The answer is to form an entity separate from yourself to run the business.
A corporation, chartered by the state in which it is headquartered, is considered by law to be a unique entity, separate and apart from those who own it. A corporation can be taxed; it can be sued; it can enter into contractual agreements. The owners of a corporation are its shareholders. The shareholders elect a board of directors to oversee the major policies and decisions. The corporation has a life of its own and does not dissolve when ownership changes.
Advantages and Disadvantages: Texas Corporation
Advantages of a Corporation- Shareholders have limited liability for the corporation's debts or judgments against the corporations.
- Generally, shareholders can only be held accountable for their investment in stock of the company. (Note however, that officers can be held personally liable for their actions, such as the failure to withhold and pay employment taxes.)
- Corporations can raise additional funds through the sale of stock.
- A corporation may deduct the cost of benefits it provides to officers and employees.
- Can elect S Corporation status if certain requirements are met. This election enables company to be taxed similar to a partnership.
- 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 $75,001 - $100,000; 39% tax on income from $100,001 - $335,000; and 34% tax on income over $335,000.
- A sole proprietor who filed a federal income tax return under the status of married, filing jointly, would pay 15% federal income tax on taxable income up to $35,800; 28% tax on income from $35,801 to 86,500; and 31% tax on income over $86,501.
Disadvantages of a Corporation
- The process of incorporation requires more time and money than other forms of organization.
- Corporations are monitored by federal, state and some local agencies, and as a result may have more paperwork to comply with regulations.
- Incorporating may result in higher overall taxes. Dividends paid to shareholders are not deductible form business income, thus this income can be taxed twice.
Federal Tax Forms for Regular or "C" Corporations
- Form 1120 or 1120-A: Corporation Income Tax Return
- Form 1120-W Estimated Tax for Corporation
- Form 8109-B Deposit Coupon
- Form 4625 Depreciation
Texas’ Business Tax Climate Ranks 6th
Texas ranks 6th nationally in the Tax Foundation's State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property. Neighboring states ranked as follows: New Mexico (23rd), Oklahoma (21st), Arkansas (35th) and Louisiana (30th).Texas’ State/Local Tax Burden under National Average
Over the past 14 years, Texas has consistently posted a below average tax burden. In recent years, that number has fallen even further as income levels have risen faster than tax collections. Estimated now at 8.7% of income, Texas’s state/local tax burden percentage is ranked 46th nationally, well below the national average of 10.0%.
Texas Levies no Personal Income Taxes
Texas levies no individual income taxes, joining six other states with the same policy. compared to other states.
Texas Levies no Corporate Income Taxes
The state of Texas, in addition to collecting no personal income taxes, collects no corporate income taxes. Only four other states (Nevada, Wyoming, South Dakota and Washington) join Texas in levying neither income tax.
| Business Partnerships | S Corp vs C Corp | Sub S Corporations | LLCs Listed by State
| Business Deductions | LLC vs S Corp | CORP vs Part/Sole Part | LLCs Taxes
| Business Formation | ICs and IRS | Piercing the Corporate Veil | How to Incorporate
| Delaware Corporation | Corporations Listed by States | S Corporations Listed by States
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