Under Texas law, a business may incorporate. If it chooses to do so, it is thereafter recognized as its own legal entity. After incorporation, buying and selling property, assenting to contracts and exercising legal rights are considered acts of the business itself and not its owners. In Texas, the process of incorporation is begun by filing with the Secretary of State in accordance with specific guidelines.

Benefits of Incorporation in Texas

Advantages of incorporation are many. The primary benefit is that the liabilities of the business can only be satisfied by the assets specifically invested into the company by the owners. Had the business remained unincorporated, owners risk losing their personal property should the business become unable to pay its liabilities. Furthermore, banks in the Addison area prefer to evaluate the credit worthiness of a business as a whole rather than that of individual owners. This makes the process of acquiring corporate loans simpler. Lastly, a corporations charter requires that ownership be divided into stakes or "shares" of stock, all of equal size. This makes the process of transferring control much more practical.

Costs of Incorporation

Incorporation can be costly. First, a modest filing fee may be charged in Texas for any business that wants to incorporate. Also, a corporation is taxed as its own entity. In other words, the profits a corporation makes are now taxed separately, while any disbursements to shareholders are taxed as individual income. This is called double taxation. However, a business may avoid this disadvantage with proper planning and assistance from a local Addison lawyer.