How to Set Up an S Corp in Texas

An S Corporation provides legal protection for its owner’s personal property in case of lawsuits, but all income of the S Corporation passes through to the individual owner’s tax returns. The liability protection combined with ease in tax filing make S Corporations a good choice for many small business owners. To establish an S Corporation in Texas, you must first file the appropriate paperwork with the state and receive registration approval. Once approved as a Texas corporation, you designate the corporation as an S Corporation by electing that status on Internal Revenue Service (IRS) paperwork.

Form the Texas Corporation

Select a name for your corporation that is unique to the state of Texas. The Office of the Secretary of State can help you determine if the name you’ve selected is unique to the state. Make sure your chosen name does not violate existing corporation trademarks. You can reserve the name for your corporation with the Secretary of State so that it cannot be taken by another corporation while you are filing your incorporation paperwork.

Obtain state of Texas Form 201--Certificate of Formation For-Profit Corporation. The form can be downloaded and printed from the Texas Secretary of State website, or you can elect to complete the form online.

Enter the name chosen for the corporation in Article 1 of Form 201. The name must contain a corporate designation, such as “corporation,” “company” or “ltd.”

Enter the registered agent information in Article 2 of Form 201. The registered agent of a corporation is the person or organization designated to take legal action on behalf of the corporation. The corporation cannot act as its own registered agent.

Identify the name and mailing address for each director of the corporation in Article 3 of Form 201.

Record information concerning the total number of shares issued for the corporation and the value of the shares, if any, in Article 4 of Form 201.

Explain the purpose of the corporation (the corporation’s primary business) in Article 5 of Form 201 and identify the person designated as the organizer of the corporation.

Select the option for filing effectiveness that applies to your situation. If you need to delay approval of the corporate filing based on a specific event, you must identify the event on Form 201.

Sign and date the form and submit it to the Secretary of State along with the appropriate filing fee.

Make an S Corporation Tax Election

Obtain a copy of IRS Form 2553--Election by a Small Business Corporation.

Enter all the required information concerning the newly formed corporation on Form 2553.

Sign the form and mail it to the appropriate IRS office, as indicated on the instructions for filing Form 2553.