Corporation

A corporation in Houston is most commonly defined as an independent domestic business entity that operates for a profit, and is a business structure that has similar characteristics to a limited liability company, such as centralized management, continuous duration and transferability of ownership interests. Corporations are owned by shareholders and the daily operations are run by directors selected by the shareholders. Additionally, the corporation is responsible for any debts are liabilities the company incurs; the shareholders are not legally liable for any debts or judgment incurred by the corporation.

Houston Corporation Attorney

If you want to create a corporation in Houston, or any of the surrounding areas in Texas, including Spring, Humble, Tomball, Aldine, Atascocita, Klein, Jersey Village, The Woodlands, Conroe or Oak Ridge North, contact the law offices of Wilhite & Lea, P.C. The attorneys at Wilhite & Lea are knowledgeable in all areas of Texas’ business laws and will help you create the best entity for your business venture. Call Wilhite & Lea at (281) 537-2171 about creating a corporation.

Corporations in Houston

Shareholders - According to Texas law, a corporation is owned by one or more shareholders who own a stake in the corporation. A shareholder has acquired this interest by purchasing shares in the company once it goes public, either at the initial public offering or by acquiring the shares later. The shareholder is not responsible for the debts or liabilities of the corporation. They are also not responsible for running the daily operations of the corporation, but instead, elect a board of directors at the shareholders’ meeting. However, under Texas law, shareholders are permitted to enter into a shareholders’ agreement to eliminate directors and provide for shareholder management.

Under the Texas Business Organizations Code § 21.157, a shareholder can purchase shares of stock in the corporation for consideration, or for some form of payment, such as cash, some benefit to the corporation or a promissory note. As defined in section 21.201 of the Texas Business Organizations Code, a shareholder has a right to:

• Vote on issues that affect the corporation,
• Receive distributions or dividends,
• Transfer the share,
• Enter into agreements with respect to the share,
• Receive notice with respect to the share, and
• Any other shareholder action

Board of Directors - The board of directors is comprised of a group of directors who are responsible for managing the daily affairs of the corporation. They are generally appointed and removed by the shareholders in the shareholders’ meeting or through proxy voting. Proxy voting is voting through a ballot if the shareholder is unable to attend the meeting. Generally, the board of directors exercise control and manage the corporation. They also have certain duties they must comply with under Texas laws, including the duties of care and loyalty. Directors are also not liable for any debts or liabilities accrued by the corporation.

Bylaws - The board of directors are responsible for adopting initial bylaws of the corporation under the Texas Business Organizations Code § 21.057. The bylaws define the operating rules of the corporation, and may contain provisions for the regulation and management of the affairs of the corporation.

Shareholders’ Agreement - The corporation is required to have a shareholder’s agreement, which must be contained in the certificate of formation, bylaws, or another written agreement that is signed by all shareholders at the time of the agreement is made known to the corporation. A shareholders agreement is valid for ten years, unless the shareholders otherwise agree to another term in the agreement. The shareholder’s agreement may contain any of the following under the Texas Business Organizations Code § 21.101:

• Restrictions on the discretion or powers of the board of directors;
• Elimination of the board of directors and authorization the business and affairs of the corporation to be managed by the shareholders;
• Establishment of the individuals who are to serve as directors or officers of the corporation;
• The determined term of office, manner of selection or removal, or term or conditions of employment of a director, officer or other employee of the corporation;
• Authorization or method of distributions;
• A division of or exercise of voting power by and between directors and shareholders;
• How losses and profits are apportioned;
• The terms of an agreement for the transfer or use of property or for the provision of services between the corporation and another person;
• Authorization of arbitration or a grant of authority to a shareholder or another person to resolve any issue that is deadlocked between the shareholders, board of directors or another person;
• Specification if winding up (ending) and termination of the corporation is required if requested by one or more shareholders or after a specified even or occurrence;
• Establishment of corporate powers, management of the business and affairs of the corporation, and the relationship between the shareholders, board of directors and the corporation.

Creation of Corporation in Houston

A corporation in Texas is created by filing a certificate of formation, or articles of incorporation, with the Texas Secretary of State. After the corporation has filed the certificate of formation, they must hold an organization meeting, according to the Texas Business Organizations Code § 21.059. The organization meeting is held by the initial board of directors in order to adopt the corporation’s bylaws, elect officers, authorize the issuance of stock, adopt a corporate seal, create an official stock certificate form, and engage in any other necessary business.

According to the Texas Business Organizations Code § 3.005, the certificate of formation in Texas must include:

• The name of the corporation;
• That a corporation is being formed;
• The purpose for which the corporation is formed;
• The intended duration of the corporation if it’s not intended to exist continuously and is instead intended to have a specific period of duration;
• The street address of the corporation’s registered office and the registered agent;
• A copy of the shareholders’ agreement; and
• The name and address of each organizer of the corporation.

A registered agent is anyone who can be served with process on behalf of the corporation. This person is essentially designated as an agent or representative of the corporation.

In order to form a corporation in Texas, all corporations must also:

• Choose a corporation name that is not similar to another filed corporation’s name, and must include the term corporation, incorporated, limited, “Corp.,” Inc.,” or “Ltd.”
• Appoint the initial directors of the corporation at the shareholders’ meeting.
• Issue stock certificates to the stockholders, or the initial owners of the corporation. This formally divides the corporation’s ownership interest.

Drawbacks of a Corporation in Houston

The disadvantages of filing a business entity as a corporation in Houston can include:

• It is usually more expensive to form than a partnership and other types of business entities;
• It can be more difficult to create and require extensive paperwork than other business entities;
• Corporations are usually strictly regulated by state and federal agencies; and
• A corporation will likely be subject to double taxation, or will be required to initially pay taxes when it makes a profit and also when dividends are paid to shareholders.

Wilhite & Lea, P.C. | Houston Corporation Lawyer

Contact Wilhite & Lea, P.C. today for a consultation about creating a corporation in Harris County in Texas. Attorney C. Keith Lea of Wilhite & Lea is an experienced business attorney in Houston who will help you identify your best business entity option and follow the correct procedures and guidelines to create your business in the most efficient manner possible. Contact Wilhite & Lea, P.C. at (281) 537-2171 for a consultation about creating a corporation throughout Harris County, and the surrounding areas of Montgomery County, Washington County, Grimes County, Fort Bend County and Waller Count.