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. 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

A corporation enjoys advantages that unincorporated companies do not. Primarily, it cannot be held accountable for an amount of debt greater than the value of the assets that the owners have invested in it. Without incorporation, the personal property of business owners is at stake should the company become unable to pay its debts. A corporation might also find it easier to finance itself through loans, allowing creditors in the Rockwall area to evaluate their investment by assessing the corporation rather than the individual credit-worthiness of its owners. Finally, 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 might 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 might avoid this disadvantage with proper planning and assistance from a local Rockwall lawyer.