When a business would like to apply for an S corp in Texas, it must file all of the appropriate documentation with the Texas Secretary of State in addition to the I.R.S. Texas S corporations may not have more than 100 shareholders and can have as few as one. However, all of these shareholders must be U.S. citizens or have status as a resident alien. It is also permissible for certain trusts and estates to own shares of the S corp. If the above applies to you and you have deemed the benefits of an S Corporation to be worth the one-time effort of application, read on to learn what you need.
1. What’s in a Name?
The first step in forming your new S corp is to give it a name. This name can be anything you like from your own name to an amalgam of your partner’s names. The only catch is that this name may not be in use already. What this means is in short, you can’t name your burger restaurant McDonald’s, Wendy’s, or Sonic, even if that is your name. These names have probably already been filed for and taken. This is why we ask our clients in Houston looking to apply for an S corp to give us a list of top three preferred names just in case.
2. Form 201
This form is also known as the Certificate of Formation – For-Profit Corporation. It is provided by the Texas Secretary of State and has its own set of articles and requirements. It is a complex form and costs a decent amount of money to file, so we recommend filling out right the first time before attempting to file it with the state. Don’t believe us? Have a look at Form 201 yourself here.
3. Choose Your Team
Part of filling out form 201 is naming all of the shareholders of the S Corporation. This includes the name and address of the business, as well as name and address of the person or persons that will be receiving the S corporation’s legal documents and communications. You also need to list each initial director and the starting amount of shares the S corp will be issuing. The minimum selling price of each share must also be provided. Other items needed for the form include:
- Purpose of the businesses
- Names and contact information for the organizer(s) of the corporation
- Signatures from each organizer
4. Money (of course)
The current fee to apply for an S corp via Form 201 is $300. This fee can be paid via personal check, money order, American Express, MasterCard, Visa, Discover, or LegalEase debit cards. All checks or money orders must be issued by a United States bank or financial institution and made out to the secretary of state. S corp fees that are paid by credit card are forced to pay a statutorily authorized convenience fee of 2.7 percent of the total fees, or $8.10.
5. Bylaws
This isn’t as hard as it sounds if you are establishing a simple S corp for yourself or you and your spouse. Bylaws are basically the rules and regulations for operating your corporation but can be as short as a paragraph. Texas does not have specific guidelines that outline what the contents of a corporation’s bylaws must be. However, shareholders or organizers must include the date and location of S corp meetings, the criteria for choosing directors, how long directors will serve, as well as the responsibilities and compensation of the officers.
6. Get an EIN
The EIN, or Employer Identification Number, is the S corp equivalent of a Social Security Number. This number is given from the Internal Revenue Service. The quickest manner in which to receive one is to apply online using irs.gov. Go to the Small Business and Self Employed section and look for the page that allows you to apply for an EIN. You will be asked for the legal name and address of the S corp, the corp’s activities and number of employees. It will also ask for the name, mailing address, and social security number of an authorized individual. You can also call the IRS and apply over the phone, but we recommend a great deal of patience for this avenue. This step also includes filing Form 2553 with the IRS.
Apply for an S Corp in Houston
If your business is located in or around the Houston area and you would like help on applying for an S corporation, please contact us to learn more about its benefits.