How to Form S-Corp in Texas

Quick Answer

To form an S-Corporation in Texas, you’ll first incorporate as a regular corporation through the Texas Secretary of State (filing fee: $300) and then elect S-Corp tax status with the IRS using Form 2553. As of April 2026, Texas requires a registered agent and has no state income tax, but corporations above $2.47 million in revenue pay franchise tax.

Step-by-Step Formation Process

1. Choose and Reserve Your Corporate Name

   • Search name availability on the Texas Secretary of State website
   • Ensure the name includes “Corporation,” “Incorporated,” “Company,” or approved abbreviations
   • Reserve the name for 120 days if needed (additional fee applies)

2. Appoint a Registered Agent

   • Designate someone with a Texas address to receive legal documents
   • Can be yourself, an employee, or a professional registered agent service

3. File Certificate of Formation (Form 201)

   • Submit through the Texas Secretary of State’s SOSDirect online system
   • Include: corporate name, registered agent information, authorized shares, incorporator details
   • Pay the $300 filing fee

4. Obtain Federal EIN

   • Apply for an Employer Identification Number through the IRS website
   • Required before making the S-Corp election

5. File Form 2553 with the IRS

   • Submit IRS Form 2553 to elect S-Corporation tax status
   • Must be filed within 2 months and 15 days of incorporation
   • All shareholders must sign the form

6. Create Corporate Bylaws and Hold Initial Meeting

   • Draft bylaws outlining corporate governance
   • Hold initial board meeting to elect officers and adopt bylaws
   • Issue stock certificates to initial shareholders

Costs Breakdown

Item	Cost	Notes
Certificate of Formation	$300	Required state filing fee
Registered Agent (if hiring service)	$100-300/year	Optional if you serve as your own
Name Reservation	Contact SOS	If needed before filing
Expedited Processing	Contact SOS	For faster processing
EIN Application	Free	Direct from IRS website
Form 2553 Filing	Free	IRS S-Corp election

Fees current as of April 2026. Contact the Texas Secretary of State for the most current fee schedule.

Requirements Checklist

Before filing your Certificate of Formation, ensure you have:

• Unique corporate name ending with required designator
• Registered agent with Texas street address
• At least one incorporator (can be anyone 18+ years old)
• Authorized share structure defined
• Initial shareholders identified (S-Corps limited to 100 shareholders)
• All shareholders must be U.S. citizens or residents
• Only one class of stock allowed for S-Corp status
• Federal EIN obtained
• Form 2553 prepared for IRS filing

Tax Implications

Federal Tax Treatment: S-Corporations are pass-through entities. Profits and losses flow through to shareholders’ personal tax returns, avoiding double taxation.

Texas State Taxes:

• No State Income Tax: Texas has no personal or corporate income tax
• Franchise Tax: Texas imposes a franchise tax on corporations with revenue exceeding $2.47 million annually
• Sales Tax: Base rate of 6.25% applies to taxable sales, with local taxes potentially increasing the total rate

Self-Employment Tax: S-Corp shareholders who work in the business must take reasonable salary subject to payroll taxes, but distributions above salary are not subject to self-employment tax.

Ongoing Obligations

Annual Franchise Tax Report: Due May 15th each year, even if no tax is owed. Corporations with revenue below $2.47 million typically owe no franchise tax but must still file the report.

Federal Tax Filings:

• Form 1120S (S-Corporation tax return) due March 15th
• Payroll tax returns if you have employees
• Form 941 quarterly if paying wages to shareholder-employees

Corporate Maintenance:

• Hold annual shareholder meetings
• Maintain corporate records and meeting minutes
• Keep registered agent information current with the state
• File amended certificates if making structural changes

Registered Agent

Texas law requires all corporations to maintain a registered agent with a Texas street address (not a P.O. Box). The registered agent receives legal documents, tax notices, and official state correspondence on behalf of your corporation.

Options for Registered Agent Service:

1. Yourself: Must have a Texas address and be available during business hours
2. Employee or Officer: Must meet the same requirements
3. Professional Service: Provides privacy, reliability, and compliance expertise

The registered agent’s name and address become public record. Many business owners prefer professional services to maintain privacy and ensure they never miss important documents.

Common Mistakes to Avoid

1. Missing the S-Corp Election Deadline: Form 2553 must be filed within 2 months and 15 days of incorporation. Missing this deadline means waiting until the next tax year.

2. Failing to Pay Reasonable Salary: The IRS requires S-Corp shareholder-employees to receive reasonable compensation. Paying too little salary to avoid payroll taxes can trigger audits and penalties.

3. Violating S-Corp Eligibility Rules: Having more than 100 shareholders, non-resident alien shareholders, or multiple share classes disqualifies S-Corp status.

4. Ignoring Corporate Formalities: Failing to hold meetings, maintain records, or keep business and personal finances separate can jeopardize liability protection.

5. Not Filing Annual Franchise Tax Reports: Even if you owe no tax, Texas requires annual franchise tax reports. Failure to file can result in forfeiture of corporate charter.

6. Mixing Business Entity Types: Don’t confuse S-Corp tax election with LLC formation. You must first form a corporation, then elect S-Corp tax treatment.

7. Inadequate Record Keeping: S-Corps require detailed records of shareholder basis, distributions, and salary payments for proper tax reporting.

Related Guides

• How to Form S-Corp in Arizona: Complete 2026 Guide
• How to Form S-Corp in Montana: Complete 2026 Guide
• How to Form S-Corp in Pennsylvania: 2026 Complete Guide
• How to Form S-Corp in Washington: Complete 2026 Guide
• How to Form S-Corp in Wyoming: Complete 2026 Guide

FAQ

What’s the difference between forming an S-Corp and LLC in Texas?

Both entities offer liability protection and pass-through taxation, but S-Corps require more formalities (bylaws, meetings, officers) and have ownership restrictions (100 shareholders max, one share class, U.S. residents only). LLCs offer more flexibility but S-Corp shareholders can potentially save on self-employment taxes through salary/distribution splits.

How long does it take to form an S-Corp in Texas?

The Certificate of Formation typically processes within 5-7 business days when filed online through SOSDirect. Expedited processing may be available for an additional fee. The IRS S-Corp election (Form 2553) processes separately and can take 8-12 weeks for confirmation.

Can I be my own registered agent in Texas?

Yes, you can serve as your own registered agent if you have a Texas street address and are available during business hours to receive legal documents. However, many business owners prefer professional registered agent services for privacy and reliability.

What happens if I miss the S-Corp election deadline?

If you miss the 2 months and 15 days deadline for Form 2553, your corporation will be taxed as a C-Corporation for the current tax year. You can request late election relief from the IRS or wait until the following tax year to make the S-Corp election.

Do I need an attorney to form an S-Corp in Texas?

While not legally required, many business owners benefit from professional guidance due to the complexity of S-Corp requirements and ongoing compliance obligations. At minimum, consider consulting with a tax professional about the S-Corp election timing and requirements.

What’s Texas franchise tax and when do I pay it?

Texas franchise tax applies to corporations with revenue exceeding $2.47 million annually. The tax is based on margin (revenue minus certain deductions) and ranges from 0.375% to 0.75%. Annual franchise tax reports are due May 15th, even if no tax is owed.

Can I convert my existing LLC to an S-Corp in Texas?

You cannot directly convert an LLC to a corporation in Texas. You would need to form a new corporation and transfer LLC assets to the corporation, which may have tax implications. Alternatively, your LLC can elect S-Corp tax treatment using Form 2553 without changing the legal entity structure.

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This article provides general information for educational purposes only and should not be considered legal or tax advice. Consult with qualified professionals for guidance specific to your business situation. Information current as of April 2026.