Texas Corporation Formation In Four Steps
Many small business owners are surprised to learn that forming a Texas corporation
requires more than simply filing the articles of incorporation with the Texas Secretary of State. But in fact, even after the state returns a new certificate of incorporation, the business owner and new corporation are required to complete several additional steps:
Step #1 - Issue Stock to Shareholders
After your Texas corporation has been formed (after the certificate of incorporation has been returned by the state), you need to issue stock to the shareholders who contribute cash or other property.
The corporation needs to follow precisely the corporate by-laws as to how this process works. But as a generalization, however, you can use uncertificated stock, which simply means that someone (perhaps you) contributes cash or property to the corporation and then you simply keep a record of the stockholder's shares as part of your corporate records.
Tip: If you want to use share certificates, the local office supplies outlet probably carries blank certificates as well as a corporate seal to "seal" the share certificates.
Step #2: Hold Stockholders Meeting
After your shareholders exist and are truly "shareholders", you need to hold a stockholders meeting to elect a board of directors in accordance with your corporate by-laws. Your corporation's board of directors oversees the officers who run the corporation on a day-to-day basis.
Note: Texas, as well as several other states (including Alabama, Arizona, Delaware, Georgia, Illinois, Kansas, Maryland, Missouri, Montana, Nevada, Pennsylvania, South Carolina, Vermont and Wyoming) allow for close corporations. Close corporations let the shareholders of a small corporation simplify the corporate governance. Close corporations simplify some of the corporate governance to deal with the situation where there's a single shareholder who sits alone on a one-person board of directors and who is the only officer in the corporation.
Step #3: Hold Board of Directors Meeting
Your board of directors will also need to meet to elect officers to the roles of president, vice president, treasurer, secretary and so on. At this initial board meeting, your bank will probably also require the board of directors to approve setting up a bank account.
Step #4: License Your Business
Texas requires a license of businesses that operate in the state. In addition, many cities also have business permit and license requirements. If you have set up a corporation for a business, therefore, you will want to identify and then acquire the necessary permits and licenses.
The Texas Secretary of State web site provides links to pages with state licensing requirements for many (if not most) types of businesses at:
http://www.texasonline.com/portal/tol/en/gov/9
You can get local city business license information by calling city government offices in the town in which you plan to operate your business.
by: Stephen Nelson
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