When it comes to starting a business in the state of Texas, there are several legal structures to choose from, including partnerships, sole proprietorships, and limited liability companies. However, for certain professions, forming a professional corporation (PC) may be the best option. In this article, we’ll discuss the process of forming a professional corporation in Texas.
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What is a Professional Corporation?
A Professional Corporation (PC) is a legal structure specifically designed for licensed professionals, such as accountants, lawyers, doctors, architects, engineers, and others. A PC provides several benefits to these professionals, including protection of individual personal assets, less personal liability, and more tax savings.
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In Texas, a PC is created through the Texas Business Organizations Code (BOC) which sets the legal requirements and regulations for its formation, management, and dissolution. By forming a PC, licensed professionals can ensure legal compliance and protection while remaining competitive in the industry.
Steps to Forming a Professional Corporation in Texas
Forming a PC is different from the traditional incorporation process, and it involves additional steps and paperwork.
Step 1: Protect Your Name
The first step to forming a PC is protecting your corporation name by searching the Texas Secretary of State (TXSOS) database to see if your name is already taken or if some words have been banned in Texas. This search must clear your proposed entity name before proceeding. Once there is a unique and acceptable name, it must be reserved for up to 120 days for $40 using the TXSOS’ Certificate of Reservation of an Entity Name form.
Step 2: Hire / Appoint Qualified Directors
Directors are responsible for managing the business affairs of the PC. In Texas, a PC may have one or more directors; however, they must be licensed professionals in the same industry as the business’ client services. When selecting directors, ensure they are reputable individuals with a history of excellence in their field. Be sure to document their appointment.
Step 3: File Certificate of Formation
To create a PC in Texas, you’ll need to file the Certificate of Formation for a Professional Corporation with the TXSOS. The form is basically your legal statement of intent to create a corporation, and it must have details of your organization including but not limited to:
- Name, address, and Texas registered agent contact information
- Statement of purpose
- Number and class of shares
- Director and officer information
- Professional licensing information
A Certificate of formation and filing fee of $300 must be filed with the Office of the Secretary of State.
Step 4: Appoint a Registered Agent
All businesses, including PC’s, must have a registered agent based in Texas who is authorized to accept legal documents and other correspondence on behalf of the business. The TXSOS must be notified in writing immediately if this agent quits, changes address, resigns, or is fired, etc.
Step 5: Obtain Necessary Business Licenses
Many professions’ practices in Texas require certain licences for businesses representing them. A PC registration does not automatically qualify for business licenses. At this point, businesses pursuing a PC should verify their professional licensure status, including eligibility conditions, Fee structure, and other applicable licenses with expert sources, such as industry-specific professional associations, licensing boards, and organizations.
Step 6: Draft Your Bylaws
By-laws specify how the corpus within the corporation will manage, handle disputes, provide the structure and guidelines of running company-wise activities of such entity is crafted. Keep it up to date and, educate your members officers on your by-law objectives. PC by-laws must comply with the Texas BOC with records of the bylaws required for state audit on a regular interval.
Conclusion
Creating a professional corporation in Texas involves fulfiling more complicated paper documentation and obligations to authorities than starting regular businesses. Planned regulatory compliance is necessary for hiring, licensing, taxes, and financing arrangements that differ by the states in the country, and professionals creating a Texas PC with other states legal formalities must adhere especially carefully-oriented and prepared legal functionaries.
It is recommended that resource hands-on with identity, expertise, automation, verification of application requirements well sorted out into an intuitive digital canvas – materials that will guide you to ensure problem – free path navigating requirements from ID verification, State registrations including City permits license obtaining authorization, drafting legal formation forms, elevating business costs and providing a budget cushion for startup. With all these guides in your hand, you can be sure to get your PC quickly registered in Texas with more time to focus on your professional activities.
The guidance above to form a professional corporation in the state of Texas caters mostly for professionals and individuals interested in creating small healthcare practices towards incorporating to form bigger entities like single or multi-specialty groups. However, Texans definitely require professional statutory legal reviews that check for pitfalls while aiming for the most compliant legally possible quality assurance paperwork for Business structures practice with licenses, rules, procedures and regulations. Going further one may want procure upcoming hire services, to get the most benefits of your fledging Texas PC.
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