Under Texas law, a business may incorporate. If it chooses to do so, it is thereafter identified as its own legal entity. An incorporated business acts in its own name, whether buying and selling property, agreeing to contracts or exercising legal rights. To incorporate in Texas, a business must file with the Secretary of State in compliance with specific guidelines.
Benefits of Incorporation in Texas
Certain advantages 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. Without incorporation, the personal property of business owners is at stake should the company become unable to pay its debts. Furthermore, a business that has not incorporated puts the unnecessary burden on creditors in the Hereford area to evaluate the credit worthiness of individual owners rather than that of the business, making loans more difficult. Lastly, 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 comes at a price. First, Texas might charge a filing fee to process applications for incorporation. Also, the corporation will pay taxes 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 might avoid this disadvantage with proper planning and assistance from a local Hereford lawyer.