Is Texas a “Friendly” State in Which to Start a New Corporation?

Texas is generally considered one of the most business-friendly states. While no state is perfect, Texas is generally regarded as one of the best states to start a corporation.

In 2023, CNBC ranked Texas in the Top Three for business-friendly states. The Lone Star State was also in Shopify’s Top Three for starting a business.

The Texas Advantage

The state has a large labor pool, business-friendly laws, and a stable economy. While Austin is perhaps best known for its embrace of innovation and entrepreneurs, that attitude can be found throughout the state.

With a workforce of over 15 million, companies can find talent to fill positions in a variety of roles. The state has consistently ranked near the top in terms of its labor pool.

The state also offers significant financial advantages. While the cost of living, like everywhere else, has increased in recent years, Texas generally requires a lower amount of capital to start a corporation.

Texas offers companies multiple tax benefits. Businesses can take advantage of credits, job creation incentives, and startup financing initiatives. It’s also one of a handful of states that doesn’t tax corporate earnings.

Setup Costs and Liability

One challenge with setting up a corporation in Texas is that the process is more time-consuming and expensive when compared to other business structures. It also requires more setup ahead of focusing on the business. Corporations must file a Certificate of Formation with the Texas Secretary of State, adopt corporate bylaws, and issue shares. While corporations may have a single shareholder, most have multiple shareholders.

While corporations may, and often do, have a board of directors, it’s not required in Texas. Shareholders can directly manage the corporation.

Shareholders and company officers are generally not personally liable for a corporation’s losses or obligations. That said, some banks or loan companies may require a personal guarantee, especially early on, before they will approve a loan. In this case, an individual would be personally liable for any issues with the loan, such as if the company defaults.

Hire a Skilled Lawyer Who Knows Texas

If you have questions about starting a corporation or other business in Texas, the attorneys at Manfred Law can help. Call us at 713-547-5460 or contact us online to schedule your consultation.