<!DOCTYPE HTML PUBLIC '-//W3C//DTD HTML 4.01 Transitional//EN' 'http://www.w3.org/TR/html4/loose.dtd'>; <html><head><title>Article Directory Online : Free Online Article Submission - Articleonlinedirectory | Forming A Corporation In Texas</title></head><body><h3>Forming A Corporation In Texas</h3><br /><br />By: <br /><br /><p><p>Incorporation is one of the first steps to starting your own business in Texas. The state law provides three options for doing this: a regular corporation, a close corporation and a professional corporation. However, you can't just pick whichever type of corporation you feel like. You'll need to pick the type that's right for the type of business it will be and the type of investors who will own it.</P><p>Professional Corporations: Required For Many White Collar Occupations</P><p>In Texas (as well as most states), many professionals licensed by the state cannot incorporate as a traditional corporation. Instead, they must operate as a professional corporation. Such professions include law and accounting.</P><p>A professional corporation is still a corporation. And the professional corporation provides many of the same benefits as a traditional corporation. But with a professional corporation, Texas typically requires that shareholders be licensed-in-the-state professionals and that business be operated in a specific way. (The exact operating rules, by the way, depend on the profession in question but a common operating rule would be that each office be supervised by a licensed professional.)</P><p>By the way, Texas professional corporations need to include either "P.C." or "A Professional Corporation" in their business name to identify themselves as professional corporations.</P><p>You can contact the state agency in charge of your profession to determine if someone in your line of work needs to be a professional corporation, but note that the list of Texas professions that must use a professional corporation includes attorneys, certified public accountants, dentists, insurance agents, nurses, optometrists, physical therapists, and veterinarians. Also, note that in Texas, physicians don't incorporate, they instead form professional associations</P><p>Close Corporations: Often Perfect for Small Family Business</P><p>Texas is one of about a dozen states that offers small business the option of a "close corporation."</P><p>Basically, a close corporation is governed by a simpler set of rules so that the business, a one-owner or husband-and-wife operation, isn't overwhelmed with the kind of rules and regulations that a larger corporation needs.</P><p>This "simplification" of the usual rules maybe seems unnecessary. But note that corporations were designed to allow passive, inactive investors to own shares of a larger professionally managed business. The inactive, passive nature of the typical shareholders resulted in state laws that very appropriately require lots of checks and balances over the people running the corporation. The corporation's shareholders, for example, usually hold annual stockholder's meetings and at those meetings elect a board of directors. That board meets regularly and also appoints and oversees corporate officers who run the show on a daily basis.</P><p>And while this system of governance works well for large businesses, it's quite excessive for small corporations, such as those with family shareholders or a single shareholder-employee.</P><p>If you're setting up a family business and if all your shareholders are agreeable to the less-restrictive rules, accordingly, you definitely want to consider the close corporation option. You form a close corporation in the same basic way as you form a regular corporation but state within your corporation articles that you're forming a close corporation.</P><p>Note: People interested in the close corporation option probably also want to look at the limited liability company option. A limited liability company probably offers even greater simplicity than a close corporation. In addition, an LLC provides its owners with more tax flexibility.</P><p>Regular Corporations: Default Choice for All Entrepreneurs</P><p>A traditional corporation is the default option for entrepreneurs. If you're not required to set up a professional corporation or you're not starting a small family business, then a regular corporation is probably what you'll choose.</P><p>S Corporation: Not Actually a Real Choice</P><p>One final piece of information: As an accountant, many people often ask me about the S corporation option. However, an S corporation isn't actually a corporation at all; it's a set of tax accounting rules that eligible entities can use for preparing their tax returns.</P><p>All of the options mentioned above--professional corporations, close corporations and regular corporations--can elect to use the S corporation tax accounting rules if the corporation meets the eligibility requirements.</P><p>Note: Some entities that aren't even corporations get to use the Subchapter S corp accounting. For example, LLCs may be able to use S corporation status.<br></P></p> <br /><br /><b>Author Resource:-></b> Stephen L. Nelson is a tax accountant and the author of the best-selling books Quicken and QuickBooks for Dummies. He has also written two ebooks about Texas corporations, <a href=http://www.scorporationsexplained.com/doityourself_TexasSCorp.htm>Forming an S Corporation in Texas</a> and <a href=http://www.llcsexplained.com/doityourself_Texas.htm>Forming a Limited Liability Company in Texas</a><br /><br /><b>Article From</b> <a href='http://www.articleonlinedirectory.com/'>Article Directory Online : Free Online Article Submission - Articleonlinedirectory</a><br /></body></html>
