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. A business seeking to incorporate in Texas must file with the Secretary of State in accordance with established guidelines.
Benefits of Incorporation in Texas
Certain benefits inure to a business in Texas that has incorporated over one that has not. First, a corporation's liabilities can never go beyond the amount invested in the business by the owners. Had the business instead remained a collection of the owners' personal assets, the personal property of the stakeholders could be liquidated to pay the liabilities of the business, if it runs into financial problems. A corporation may also find it easier to finance itself through loans, allowing creditors in the Canyon area to evaluate their investment by assessing the corporation rather than the individual credit-worthiness of its owners. Finally, ownership of a corporation is divided into equal portions or "shares" of stock, which may be bought and sold much more easily than the ownership of an unincorporated business.
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 Canyon lawyer.