Under Texas law, a business may incorporate. If it chooses to do so, it is thereafter identified as its own legal entity. After incorporation, buying and selling property, agreeing to contracts and exercising legal rights are considered acts of the business itself and not its owners. A business looking to incorporate in Texas must file with the Secretary of State in accordance with established guidelines.
Benefits of Incorporation in Texas
An incorporated business enjoys certain advantages, the most important being a limit of liability for the shareholders. The most shareholders can lose is the amount they invest in the business. If the business had remained a personal asset of the owners, they could run the risk of losing their personal property to pay for the company's financial liabilities in case of default. Also, creditors in the Beaumont area generally prefer to deal with corporations, since a loan is an investment more easily evaluated when the credit-worthiness of various owners is not an issue. Lastly, the ownership of a corporation is divided into an abundance of equal portions or "shares" of stock. Without this mechanism, transferring ownership of a business would be impractical.
Costs of Incorporation
These benefits come at a price. First, incorporation in Texas may require a filing fee. Second, a corporation pays taxes just like any other entity. The incomes of owners as individuals are also taxed of course, meaning that income to the corporation might be subject to double taxation. However, this disadvantage can be avoided with proper planning and help from a local Beaumont lawyer.