Texas Corporation Guide — Updated April 2026

How to Form a
Texas Corporation

$300 Certificate of Formation under TBOC § 3.005, no state corporate income tax, the Franchise Margin Tax math, the $2.47M No Tax Due threshold, the brand-new Texas Business Court (operational since September 2024), and the honest reality that 90%+ of Texas-headquartered Fortune 500 corporations are still chartered in Delaware.

Form Texas Corporation — $599 All-In Read the honest guide first

Texas Corporation at a Glance

$300

Certificate of Formation Fee

1–3 days

SOSDirect Standard Processing

State Corporate Income Tax

$2.47M

Franchise Tax No-Tax-Due Threshold

Read this before paying Texas $300 + your first PIR cycle

Should You Actually Form a Texas Corporation?

Texas is the most pro-business large state in the United States by almost every measurable metric: #1 in Inc 5000 representation for most of the past decade, #1 destination for Fortune 500 corporate relocations (Tesla, Oracle, HP Inc., Toyota Motor North America, McKesson, Caterpillar, Charles Schwab, CBRE all moved their headquarters into Texas between 2015 and 2024), #2 US state economy by GDP at ~$2.6T, no state personal income tax, a constitutional prohibition against ever creating one (Texas Constitution Article VIII § 24-a, Proposition 4, 2019), and a population of ~30 million growing ~2× the national rate.

And yet — here is the honest truth most Texas formation services do not lead with: an estimated 90%+ of major Texas-headquartered corporations remain Delaware-chartered foreign-qualified entities. ExxonMobil, Tesla (until the 2024 vote), Dell, AT&T, American Airlines, Texas Instruments, Charles Schwab, McKesson, Caterpillar, CBRE, HP Inc., Kimberly-Clark, Phillips 66 — every one of them is a Delaware corporation that just happens to operate from a Texas address. The reasons are unchanged from California or New York: VC fundraising, DGCL governance precedent, 233 years of Court of Chancery opinions, and standardized M&A documentation. Texas has been working hard to close that gap (TBOC reform 2010, Texas Business Court 2024, the 2024 DExit campaign that brought Tesla home), but the institutional defaults remain Delaware.

You are a Texas-licensed professional required to form a TX Professional Corporation

Physicians, dentists, optometrists, podiatrists, chiropractors, veterinarians, CPAs, architects, engineers, and other Texas-licensed professionals who want corporate-form practice typically must form a Professional Corporation (PC) under TBOC Title 7 Chapter 301 or a Professional Association (PA) under Chapter 302. Out-of-state PCs do not satisfy the Texas licensing-board requirements for in-state practice. If this is you, Texas PC or PA is not a choice — it is the compliant structure. Eleet AI files Texas PCs and PAs; specify your profession at checkout.

You operate a state-chartered Texas bank, insurance carrier, or regulated entity

Texas Department of Banking regulates state-chartered Texas banks; Texas Department of Insurance regulates Texas-domiciled insurance carriers; Texas Department of Savings and Mortgage Lending regulates Texas mortgage companies. Each of these regulatory regimes requires Texas-domiciled corporate structure. If your industry requires Texas charter, that is the answer — no structural alternative exists.

You are bootstrapping in Texas with no VC plans, no out-of-state operations

A Texas-only bootstrapped business — Texas customers, Texas employees, Texas suppliers, no fundraising path beyond friends-and-family or revenue, no plans for an out-of-state expansion or M&A exit — may prefer a Texas corporation to avoid foreign-qualification overhead and to litigate any disputes in the new Texas Business Court rather than the Delaware Court of Chancery. The TX Franchise Margin Tax applies the same whether you are TX-chartered or DE-chartered foreign-qualified, so there is no tax difference for the operating decision; the structural choice is a forum-and-governance decision.

You want to participate in the Texas Stock Exchange (TXSE) listing pipeline

The Texas Stock Exchange (TXSE) — backed by BlackRock and Citadel Securities, headquartered in Dallas — filed its Form 1 with the SEC in early 2025 and targets first listings late 2025 / early 2026. TXSE has positioned itself as more issuer-friendly than NYSE or NASDAQ on listing standards and corporate-governance requirements. For a Texas-headquartered company that wants to participate in this new exchange ecosystem from launch, Texas-chartered corporate form (paired with TX-domicile signaling) becomes a meaningful brand statement. Whether TXSE achieves listings parity with NYSE/NASDAQ remains to be seen — but if you are a TX founder, the option is now on the table.

Why Tesla, Dell, AT&T, and most Texas F500s are still Delaware corporations

1. DGCL precedent. Delaware General Corporation Law has 233 years of Chancery opinions on fiduciary duty, merger mechanics, appraisal rights, hostile takeovers, and stockholder litigation. Texas Business Organizations Code took effect January 1, 2010 (consolidating the prior TBCA, TLLCA, TRPA codes), and the Texas Business Court only began hearing cases September 1, 2024 — Texas is building its commercial-law corpus from scratch in real time. For predictable governance precedent, DGCL is still the gold standard.

2. Standardized fundraising paperwork. NVCA model term sheets, Y Combinator SAFEs, Series Seed documents, and every major venture firm's investment templates default to a Delaware C-Corp issuer. Conversion to a non-DE entity adds friction and counsel cost. For a Texas startup planning to raise institutional capital, the default is Delaware C-Corp + Texas foreign qualification (under TBOC § 9.001).

3. Court of Chancery vs Texas Business Court. Delaware Chancery has ~5 chancellors and ~7 vice chancellors, all specialized in equity and corporate law, hearing cases since 1792 with no juries. Texas Business Court launched September 2024 with 11 divisions but very limited body of opinions. The systems are not yet comparable for institutional investors who care about exit-time litigation predictability.

4. Tesla\'s 2024 reincorporation is the exception that proves the rule. When Tesla shareholders voted June 13, 2024 to redomesticate from Delaware to Texas (following the Delaware Chancery rejection of Musk\'s $56B compensation package in Tornetta v. Musk), it was framed as a major DExit moment. But the vote also illustrated the institutional friction: Tesla is unique in having a controlling shareholder willing to override governance defaults; almost no VC-backed corporation has the leverage to replicate that structure mid-life. Most Texas-headquartered companies remain DE-chartered because reincorporation is expensive, requires shareholder approval, and triggers tax events.

5. The Franchise Margin Tax hits either way. Foreign-qualifying a Delaware corporation in Texas under TBOC § 9.001 triggers the same Franchise Margin Tax exposure as a TX-chartered corp. You do not save state tax by choosing Texas over Delaware — you save it by not having Texas operational nexus. So if you have to pay Texas franchise tax anyway, you may as well get DGCL governance and Court of Chancery jurisdiction.

Most TX corp guides quote $300 and stop — read the actual tax math

The Franchise Margin Tax — Texas\'s Income-Tax Substitute

Texas does not tax corporate income. Instead, Texas levies the Franchise Tax (a.k.a. Margin Tax) under Tax Code Chapter 171 on the "taxable margin" of every taxable entity doing business in Texas. Texas was the first US state to use margin (rather than net income) as the corporate-tax base when SB 1 of the 79th Legislature Special Session reformed the prior franchise tax effective January 1, 2008. The trade-off: corporations pay franchise tax even on losses (because margin is calculated on revenue, not net income) — but the No Tax Due threshold has been raised to $2.47 million as of 2024 (HB 3, 88th Leg., R.S., 2023), so the typical pre-revenue and small-revenue Texas corporation owes $0.

If revenue ≤ $2.47M

No Tax Due

• $0 franchise tax owed
• File only PIR (Form 05-102)
• No 05-163 No Tax Due Report needed
• Due May 15 each year
• Tax Code § 171.002(d)
• HB 3 (2023) raised threshold

If revenue ≤ $20M (EZ)

EZ Computation

• 0.331% of total revenue
• Form 05-169
• No COGS / compensation deductions
• Simplest calculation — single number
• Tax Code § 171.1016
• Most consulting + SaaS startups elect

Standard Computation

Margin Tax

• 0.75% of taxable margin
• 0.375% retail/wholesale (NAICS 42–45)
• Margin = lesser of 4 methods
• Form 05-158 Long Form
• Tax Code § 171.101
• Required if revenue > $20M

The 4 Margin Methods (pick whichever is lowest)

Method 1 — Total Revenue minus COGS (Tax Code § 171.1012). Available for entities producing or acquiring physical goods. Detailed COGS rules track federal IRC § 263A but with Texas-specific modifications. Best for inventory-heavy businesses.

Method 2 — Total Revenue minus Compensation (Tax Code § 171.1013). Capped at $400,000 per employee for compensation deduction (2024 limit, indexed). Best for service-heavy businesses with high payroll.

Method 3 — Total Revenue × 70% (Tax Code § 171.101(a)(1)(B)(ii)). Pure-percentage method, no allocations. Best when you don\'t qualify for or don\'t want to detail Methods 1 or 2.

Method 4 — Total Revenue minus $1,000,000 (Tax Code § 171.101(a)(1)(B)(iii)). Flat $1M deduction. Best for mid-revenue businesses where neither COGS nor compensation deduction is large.

You apply the LOWEST margin from these four methods, then multiply by 0.75% (or 0.375% for retail/wholesale). Switching methods year-over-year is permitted; recalculate annually.

Worked example — Austin SaaS corporation with $5M revenue and $2M payroll

Scenario: Texas-chartered (or Delaware corp foreign-qualified) operating SaaS corporation, Austin office, $5M revenue, $2M total compensation, no COGS (pure SaaS).

Method 1 (revenue – COGS): $5M – $0 = $5M margin × 0.75% = $37,500.

Method 2 (revenue – compensation): $5M – $2M = $3M margin × 0.75% = $22,500.

Method 3 (revenue × 70%): $3.5M × 0.75% = $26,250.

Method 4 (revenue – $1M): $4M × 0.75% = $30,000.

EZ Computation alternative: $5M × 0.331% = $16,550 — lowest of all five options.

Conclusion: Elect EZ Computation on Form 05-169 → owe $16,550 in TX franchise tax. Total state-level annual cost: $16,550 + $0 PIR fee = $16,550.

Compare to California ($5M apportioned): 8.84% × $5M = $442,000 + $800 minimum = $442,800. Austin saves $426,250 vs San Francisco on the same $5M income.

Compare to New York City ($5M apportioned): 6.5% × $5M + 30% MTA + 8.85% NYC = $325,000 + $97,500 + $442,500 = $865,000. Austin saves $848,450 vs Manhattan on the same $5M income.

No Tax Due reporting after May 15: Late filing past May 15 triggers a $50 late penalty under § 171.362, plus a 5% additional penalty if combined with unpaid franchise tax. Failure to file for 120 days triggers forfeiture of corporate privileges under § 171.251 — the corporation loses the right to sue, defend lawsuits, and conduct business in Texas until reinstated (which requires paying all back franchise tax + penalties + interest + reinstatement fee). Forfeiture is much faster than California\'s 5-year suspension trajectory and faster than the typical 3-year window in most other states. Calendar May 15 every year as a board-level priority — the Comptroller does not send forgiving reminders.

8 Steps to Form a Texas Corporation

Choose your corporate name

Under TBOC § 5.054, your name must be distinguishable from every entity on file at the Texas Secretary of State and must contain "Corporation", "Company", "Incorporated", or "Limited" (or abbreviations Corp., Co., Inc., Ltd.). Texas is unusually liberal in permitting "Company" or "Co." as a corporate designator (unlike California which restricts that designator to only certain entity types). Search availability at direct.sos.state.tx.us via SOSDirect (requires registration + $1 search fee) or the free Texas Taxable Entity Search at mycpa.cpa.state.tx.us/coa.

Name reservation costs $40 for 120 days under TBOC § 5.103. A Professional Corporation name must include "Professional Corporation" or "P.C." under TBOC § 301.005 AND comply with profession-specific naming rules (e.g., medical PCs subject to 22 TAC § 165.5, legal PCs subject to TX Disciplinary Rules of Professional Conduct Rule 7.01). Restricted words include "Bank", "Trust", "Insurance", "Olympic" — each requires approval from the relevant Texas regulator before SOS will accept the filing.

Identify your registered agent + registered office

Under TBOC § 5.201, every Texas corporation must continuously maintain a registered agent and a registered office in Texas. The registered office MUST be a physical Texas street address (no P.O. boxes, no commercial mail receiving agency boxes), and the registered agent must be available during normal business hours to accept service of process in person. The registered agent can be: (a) an individual Texas resident, OR (b) a domestic or foreign corporation, LLC, or LP authorized to transact business in Texas. Failure to maintain a registered agent triggers involuntary forfeiture of charter under TBOC § 11.251.

Texas does NOT have a default Department of State agent-of-service designation (unlike New York under BCL § 305(a)). You cannot rely on the state to receive process for you. Eleet AI provides a licensed Texas registered agent in Houston, Austin, Dallas, or San Antonio (your choice at checkout) — included free for year 1, $100/year for years 2+.

Decide on capital structure (shares + par value)

Texas does NOT charge a per-share organization tax (unlike New York\'s Tax Law § 180 or Delaware\'s Authorized Shares Method franchise calculation). Authorized share count is unrestricted and free in Texas — use the Silicon-Valley-standard 10,000,000 authorized common shares at $0.00001 par value with no fee implication. This sets up Section 1202 QSBS eligibility (when combined with the federal $50M aggregate-gross-assets-at-issuance threshold), Section 83(b) elections on founder restricted stock, and clean Series Seed / Series A preferred-stock authorization under § 21.155 blank-check authority.

For a single-shareholder bootstrap corporation, 1,000 authorized shares at $0.01 par with 100 issued is also fine; the structure is reversible by Certificate of Amendment if you later raise capital. The TBOC permits common, preferred, multi-class, and series stock under §§ 21.151–21.165 — the Texas regime closely tracks DGCL Subchapter V (§§ 151–153).

Draft + file Certificate of Formation (Form 201)

Texas Form 201 (Certificate of Formation — For-Profit Corporation) is the standard formation document. Under TBOC § 3.005, it must state: (1) corporate name + designator; (2) period of duration (perpetual is the default — leave blank); (3) purpose (use the "to engage in any lawful business" boilerplate per TBOC § 2.003); (4) registered agent + registered office; (5) authorized share count + par value or no-par; (6) name and address of EACH initial director (TBOC § 21.403 requires only one); (7) name and address of the organizer.

Optional but near-universal: TBOC § 7.001(b) director liability limitation language (Texas\'s equivalent of DGCL § 102(b)(7)) + TBOC § 8.101 indemnification authorization + preferred-stock blank-check authority under § 21.155. Include all three in the initial Certificate to avoid amendments later. File online through SOSDirect ($300 + $5 SOS service charge), by mail, or in person at 1019 Brazos St., Austin, TX 78701. SOSDirect returns the file-stamped Certificate by email within 1–3 business days.

Hold the organizational meeting + adopt bylaws

Within 30 days of formation, hold an organizational meeting (or act by unanimous written consent under TBOC § 6.201) to: adopt bylaws, elect officers, ratify the registered agent appointment, authorize a corporate bank account, set the fiscal year, approve issuance of founder shares + reserve shares for option pool, authorize Section 83(b) election filings if restricted founder stock is being issued (CRITICAL — 30-day deadline from the date of restricted-stock grant, not from formation), and authorize the CEO and Treasurer to take ministerial actions (open bank account, file IRS Form 2553 for S-election if applicable, file Form SS-4 for EIN if not already obtained).

Texas law does not require bylaws to be filed with the state — they are an internal governance document under TBOC § 21.057 maintained at the principal office. Standard items: meeting notice + quorum, board composition + indemnification, officer roles, share transfer restrictions, dissolution. Eleet AI provides a Texas-tailored Bylaws template + Action by Sole Incorporator + Stock Issuance Resolutions with the $599 all-in formation.

Obtain federal EIN + Texas Comptroller WebFile account

Apply for the federal EIN (Employer Identification Number) at irs.gov via Form SS-4 — instant assignment online for entities with US-based responsible party + SSN/ITIN. The EIN is required to open a bank account, hire employees, file federal tax returns, and register with the Texas Comptroller. Eleet AI files the EIN application as part of the $599 all-in formation.

Register for a Texas Comptroller WebFile account at comptroller.texas.gov immediately after formation. The Comptroller assigns a Texas Taxpayer Number (different from EIN) and links it to your SOS file number. You will use WebFile to submit the annual PIR (Form 05-102), No Tax Due Report (Form 05-163, no longer required for 2024+ if under threshold), or EZ Computation (Form 05-169) / Long Form (Form 05-158) franchise tax return — all due May 15 each year.

Register for Texas sales-tax permit (if selling taxable items)

If your corporation will sell taxable items, taxable services (including SaaS — Texas Comptroller treats SaaS as taxable under 34 TAC § 3.330), or rent tangible personal property in Texas, you must register for a Texas Sales and Use Tax Permit at comptroller.texas.gov BEFORE making your first taxable sale. Application is free. Once issued, you collect Texas state sales tax (6.25%) plus applicable local rates (up to 2.0% combined cap) and remit monthly, quarterly, or annually depending on volume.

Out-of-state sellers (no Texas physical presence) cross economic nexus at $500,000 in TX gross receipts under Tax Code § 151.107 and must register at that point. Marketplace facilitators (Amazon, Etsy, eBay) collect sales tax on behalf of marketplace sellers under Tax Code § 151.0242 — verify whether your marketplace handles collection before registering separately.

Calendar May 15 PIR + ongoing compliance

Add to your corporate calendar: May 15 each year — Public Information Report (PIR, Form 05-102) due to the Comptroller regardless of fiscal year-end. If revenue ≤ $2.47M, file ONLY the PIR. If revenue > $2.47M but ≤ $20M, also file Form 05-169 EZ Computation. If revenue > $20M, file Long Form Form 05-158. Late penalty starts $50 + 5% on unpaid tax + interest. After 120 days delinquent, corporation forfeits its right to sue or defend lawsuits in Texas until reinstated.

No Texas SOS annual report exists — the PIR covers that function. The TX SOS only requires periodic updates if registered agent or principal office changes (Form 401 Statement of Change, $15). Eleet AI sends May 15 reminder emails 60, 30, and 7 days before the PIR deadline to every Texas-formation customer for the lifetime of the engagement.

Texas Corporation — Honest Cost Breakdown

Below is the full lifetime cost stack for a Texas C-Corporation, including every fee you actually pay to the State of Texas, the Comptroller, and to your service provider. Formation fee + one registered agent year + EIN + bylaws + organizational consents + first-year PIR is what we mean by "all-in." Everything below the all-in line is annualized recurring cost.

Item	Frequency	Amount
Texas SOS Certificate of Formation (TBOC § 4.151)	One-time	$300
SOSDirect online service charge	One-time	$5
Eleet AI formation service	One-time	$299
Optional: 24-hour expedite	One-time	+$25
All-in formation (standard)	One-time	$599
Public Information Report (Form 05-102)	Annual May 15	$0
Franchise Tax (if revenue ≤ $2.47M)	Annual May 15	$0
Franchise Tax — EZ Computation (revenue ≤ $20M)	Annual May 15	0.331% of revenue
Franchise Tax — Standard Margin (revenue > $20M)	Annual May 15	0.75% of margin
Franchise Tax — Retail/Wholesale (NAICS 42–45)	Annual May 15	0.375% of margin
Registered agent (year 2+)	Annual	$100/yr
EIN (IRS — included)	One-time	Included
Texas Sales and Use Tax Permit (if applicable)	One-time	$0
Form 401 Statement of Change (RA / address)	As needed	$15

Prices verified against Texas Secretary of State and Texas Comptroller of Public Accounts published schedules as of April 2026. The $300 Certificate of Formation fee is set by TBOC § 4.151. The $2.47M No Tax Due threshold for franchise tax is set by Tax Code § 171.002(d) as amended by HB 3 (88th Leg., R.S., 2023, eff. Jan 1, 2024). Texas does NOT charge an organization tax based on authorized share count — unlike New York (Tax Law § 180) or Delaware (Authorized Shares Method franchise calculation), Texas allows unlimited authorized shares at the $300 flat fee. EZ Computation election is on Form 05-169 under Tax Code § 171.1016.

Texas Business Organizations Code — The Sections You Will Actually Encounter

The Texas Business Organizations Code (TBOC), effective January 1, 2010, consolidated the prior Texas Business Corporation Act, Texas Limited Liability Company Act, Texas Revised Partnership Act, Texas Revised Limited Partnership Act, and other entity statutes into a single unified code. For-profit corporations are governed by Title 2 (Chapter 21 — Corporations) and Title 1 general provisions (filing, names, registered agents, mergers). These are the sections your diligence counsel will reference — and where Texas differs materially from Delaware.

§ 3.005 — Certificate of Formation Contents

Required elements of a Texas Certificate of Formation. Name with designator, purpose, period of duration, registered agent + registered office, authorized shares, initial directors, organizer. Form 201 is the standard SOS-provided template.

§ 6.201 — Action by Written Consent

Permits shareholder and director action by written consent in lieu of meeting. Default rule: unanimous written consent for actions without a meeting. The Certificate of Formation may permit majority consent under § 6.202 — INCLUDE this opt-in if you anticipate multi-shareholder governance, otherwise routine actions require either a meeting or unanimous sign-off (similar to NY BCL § 404 but with the opt-in escape valve Texas provides).

§ 7.001(b) — Director Liability Limitation

Texas\'s equivalent of DGCL § 102(b)(7). Permits the Certificate of Formation to eliminate director monetary liability for breach of fiduciary duty, with carve-outs for breach of duty of loyalty, acts/omissions not in good faith, intentional misconduct, knowing violations of law, transactions involving improper personal benefit, and acts/omissions for which the director receives an improper benefit. Include this clause in the initial Certificate of Formation; otherwise an amendment is required later.

§ 8.001–8.105 — Indemnification

Texas\'s indemnification framework for directors and officers. § 8.101 mandatory indemnification when officer/director prevails. § 8.102 permissive indemnification with conditions. § 8.103 court- ordered indemnification. § 8.105 advancement of expenses. The Certificate of Formation should authorize maximum permissible indemnification — Texas tracks DGCL § 145 closely on this.

§ 21.151–21.165 — Stock Classes, Series, and Issuance

Authorizes multiple classes and series of stock with different rights, preferences, and privileges. § 21.155 blank-check preferred authority is the mechanism for Series Seed / Series A / Series B issuance via subsequent board action + Certificate of Amendment — the same pattern Delaware corporations use. Include § 21.155 blank-check authority in the initial Certificate to enable future preferred-stock issuance without a shareholder vote.

§ 21.401–21.418 — Directors

Texas requires at least one director (§ 21.403) with no maximum. Default term is one year. Quorum is majority unless bylaws or Certificate provide otherwise. Director removal requires majority shareholder vote unless cause is required by the Certificate. Standard Texas business judgment rule under § 21.418 — directors who act in good faith, with reasonable care, and in the best interest of the corporation are protected.

§ 21.601 — Limitation of Director Liability

Companion to § 7.001(b). Must be specifically included in the Certificate of Formation to take effect. Once adopted, eliminates personal liability of directors to the corporation or its shareholders for monetary damages for acts or omissions in their capacity as directors, subject to the standard carve-outs (loyalty, bad faith, intentional misconduct, knowing legal violations, improper personal benefit). This is the DGCL § 102(b)(7) clone every Texas corp should include from day one.

§ 21.701–21.755 — Mergers and Conversions

Authorizes mergers (TX corp + TX corp), interspecies mergers (TX corp + TX LLC + TX LP), and conversions (TX corp → TX LLC, TX corp → DE corp, TX corp → foreign entity). The conversion mechanism in § 10.101–10.107 is what Tesla used to redomesticate from DE to TX in June 2024. Reverse — DE corp → TX corp — uses DGCL Subchapter IX domestication procedures.

Title 7 Chapter 301 — Professional Corporations

Governs Texas Professional Corporations. § 301.005 name requirements ("P.C." or "Professional Corporation"). § 301.007 shareholder licensure restriction. § 301.012 mandatory share buyback on disqualification. § 301.010 professional liability not shielded — the PC only limits non-malpractice vicarious liability. Most Texas attorneys form PLLCs (Chapter 304) instead; most Texas physicians form Professional Associations (Chapter 302).

§ 9.001 — Foreign Entity Registration

How a Delaware corporation foreign-qualifies in Texas. File Form 301 (Application for Registration) with the SOS, $750 fee (more expensive than the $300 domestic formation), include a Certificate of Existence from Delaware dated within the last 90 days. The foreign-qualified DE corp pays the same Texas Franchise Margin Tax as a TX-chartered corp. This is the path most Texas-headquartered VC-backed corporations take.

Things That Actually Make Texas Texas

$2.6T

Texas GDP — the #2 US state economy behind California, surpassing New York in 2022. If Texas were an independent country, it would be the world\'s 8th-largest economy, between France and Italy.

Article VIII § 24-a

Texas Constitution Article VIII § 24-a (Proposition 4, 2019, ratified 74% to 26%) — permanently bans any future state personal income tax without statewide referendum AND legislative supermajority. The strongest constitutional protection against state income tax in the United States.

Sept 1, 2024

Texas Business Court operational date — the first specialized commercial-litigation trial court in Texas history. Created by SB 27 (88th Leg. R.S., 2023). 11 divisions across major metro areas, jurisdiction over disputes ≥ $5M and certain corporate-governance matters.

June 13, 2024

Tesla shareholders voted to redomesticate from Delaware to Texas — the most prominent DExit in US corporate history. Followed Delaware Chancery\'s Tornetta v. Musk decision rejecting Musk\'s $56B compensation package.

TXSE

Texas Stock Exchange — backed by BlackRock and Citadel Securities, headquartered in Dallas. Filed Form 1 with SEC in early 2025; first listings expected late 2025 / early 2026. Aims to compete with NYSE and NASDAQ on more issuer-friendly terms.

$2.47M

Franchise Tax No-Tax-Due threshold for 2024+ — raised from $1.23M by HB 3 (2023). Most Texas startups owe $0 franchise tax and file only the Public Information Report.

SOSDirect

Texas Secretary of State online filing portal at direct.sos.state.tx.us — among the fastest in the United States. Standard processing 1–3 business days; optional 24-hour expedite $25 (rarely needed because standard is already next-business-day in many cases).

Margin Tax

Texas was the first US state to use margin (rather than net income) as the corporate tax base — SB 1, 79th Leg. Special Session, effective Jan 1, 2008. The 4-method calculation under Tax Code § 171.101 lets corporations pick the lowest-margin method each year.

Tesla / Oracle / HP / Toyota

Recent Texas headquarters relocations: Tesla (Palo Alto → Austin, Oct 2021), Oracle (Redwood Shores → Austin, Dec 2020 → back to Nashville 2024), HP Inc. (Palo Alto → Houston, 2022), Toyota Motor North America (Torrance → Plano, 2017), McKesson (San Francisco → Irving, 2019), Caterpillar (Deerfield IL → Irving, 2022), Charles Schwab (San Francisco → Westlake, 2021), CBRE Group (Los Angeles → Dallas, 2020).

PIR May 15

Public Information Report — the Texas substitute for an annual report. Filed with the Comptroller of Public Accounts (NOT the Secretary of State) by May 15 each year, regardless of fiscal year-end. $0 PIR filing fee. Late = $50 + 5% penalty + 120-day forfeiture trajectory.

SaaS Taxable

Texas Comptroller treats SaaS, cloud services, and remote-access software as taxable under 34 TAC § 3.330 — uncommon among states. A Texas SaaS corporation must collect 6.25% state + local sales tax on Texas-customer revenue. Texas has been aggressive on this position since 2018.

Texas Triangle

The Houston–Dallas–Austin–San Antonio megaregion ("Texas Triangle") concentrates ~80% of Texas population and economy. ~26 million people, the largest US megaregion outside Bos-Wash and Cal-City corridors. The center of US corporate-relocation gravity since 2015.

Frequently Asked Questions

How much does it cost to form a Texas corporation?

Texas charges $300 for the Certificate of Formation filed with the Secretary of State under TBOC § 4.151 (filing-fee schedule). The standard processing fee includes regular turnaround through the SOSDirect online portal; the optional 24-hour expedite is $25 under § 4.151 (rare among states — Texas is already fast). No paid same-day or 2-hour tier exists. Franchise Tax is administered by the Comptroller of Public Accounts, not the Secretary of State, so the $300 filing fee is your entire formation cost to the State of Texas. Eleet AI charges $599 all-inclusive: $299 service + $300 state filing + Certificate of Formation drafted with TBOC § 21.601 limitation-of-director-liability language, registered agent in Texas for year one, federal EIN application, and Public Information Report calendar reminders. National providers advertise $0–$299 service fees but layer the $300 state, $125–$299/yr registered agent, $49–$99 EIN upsell, and $50–$300 Comptroller franchise-tax registration help separately — real total usually lands at $500–$900+ before the first PIR.

Does Texas have a state corporate income tax?

No. Texas is one of only 4 US states (NV, OH, SD, WA, WY also have variants — Texas is in the no-corporate-income-tax club) with no traditional corporate income tax. Instead, Texas levies the Franchise Tax — also known as the "Margin Tax" — under Tax Code Chapter 171 on the "taxable margin" of every taxable entity (corporations, LLCs, partnerships, professional associations) doing business in Texas. The Franchise Tax is calculated on margin (not income), and Texas was the first US state to use this base when SB 1 of the 79th Special Session reformed the franchise tax effective Jan 1, 2008. The trade-off is real: corporations pay Franchise Tax even on losses (because margin is calculated on revenue, not net income) — a startup with $5M revenue and $5M expenses still owes franchise tax on the EZ Computation 0.331% × $5M = $16,550 minimum (unless under the No Tax Due threshold). For most pre-revenue and small-revenue corporations, the No Tax Due threshold means $0 owed.

What is the No Tax Due threshold and how does it work?

Under Tax Code § 171.002(d) and Comptroller policy, a taxable entity owes NO Franchise Tax if its annualized total revenue is at or below the No Tax Due threshold. The threshold has been raised dramatically by recent legislation: for reports originally due on or after Jan 1, 2024 (HB 3, 88th Leg. R.S., 2023), the threshold is $2.47 million in annualized total revenue — up from $1.23 million for 2022–2023 and $1.18 million for prior years. Effective for the 2024 report year forward, entities below this threshold do not even need to file the No Tax Due Report (Form 05-163) — they file only the Public Information Report (Form 05-102, due May 15 annually). This is a significant compliance simplification. For the typical bootstrapped Texas corporation generating less than $2.47M in annual revenue, total state-level annual obligations are: file PIR ($0), pay $0 franchise tax. That makes Texas one of the lowest-friction operating-state regimes in the United States for early-stage companies.

How is the Texas Franchise Margin Tax actually calculated?

For corporations exceeding the $2.47M No Tax Due threshold, the Franchise Tax is calculated on the LESSER of four "margin" methods under Tax Code § 171.101: (1) Total revenue minus cost of goods sold (COGS), (2) Total revenue minus compensation, (3) Total revenue × 70%, (4) Total revenue minus $1 million. The taxable entity picks whichever produces the lowest margin. The tax rate is then applied: 0.75% standard, 0.375% for entities primarily engaged in retail or wholesale trade (NAICS 44, 45, 42), 0.331% for the EZ Computation (available to entities with annualized revenue ≤ $20M who elect to skip COGS/compensation deductions — Form 05-169). Worked example: a Texas C-Corp consulting firm with $5M revenue and $2M payroll, no COGS. Method 2 (revenue – compensation) = $5M – $2M = $3M margin × 0.75% = $22,500 franchise tax. Method 3 (revenue × 70%) = $3.5M × 0.75% = $26,250. Method 4 (revenue – $1M) = $4M × 0.75% = $30,000. Method 2 produces the lowest tax: $22,500. EZ Computation alternative: $5M × 0.331% = $16,550 — even cheaper, so most sub-$20M consulting firms elect EZ. Methods are recalculated annually; switch as needed.

What is the Public Information Report and when is it due?

Under Tax Code § 171.203 and 34 TAC § 3.587, every Texas corporation files a Public Information Report (PIR, Form 05-102) annually with the Comptroller of Public Accounts — NOT the Secretary of State. Texas has no separate "annual report" filing with the SOS like most other states; the PIR is the equivalent. The PIR discloses: (a) corporate name + Texas SOS file number, (b) federal EIN, (c) principal office address, (d) name + address of EVERY officer and director, (e) registered agent + registered office address, (f) name of the parent corporation if any. The PIR is due May 15 each year regardless of fiscal year-end (corporations on a non-calendar fiscal year still file by May 15 covering the prior calendar period). Late filing past May 15 triggers a $50 late penalty under § 171.362, plus 5% additional tax penalty if combined with unpaid franchise tax. Failure to file for 120 days triggers forfeiture of corporate privileges under § 171.251 — the corporation loses the right to sue, defend lawsuits, and conduct business in Texas until reinstated. File online via the Comptroller WebFile system; paper Form 05-102 is accepted but adds processing time. The PIR is public record and searchable at comptroller.texas.gov.

Should I form my corporation in Texas or Delaware?

Delaware if you plan to raise institutional venture capital, expect to operate in multiple states, or anticipate an exit transaction — period. Nearly every major Texas-headquartered Fortune 500 is a Delaware corporation: Tesla (DE — moved HQ from Palo Alto to Austin in October 2021 but kept the DE charter, then technically reincorporated in TX following the 2024 shareholder vote, but most of the fleet of comparable companies remained DE), Dell Technologies (DE; HQ Round Rock), AT&T (DE; HQ Dallas), ExxonMobil (NJ then TX-domesticated 1999 then DE 2024 — outlier), Texas Instruments (DE; HQ Dallas), American Airlines Group (DE; HQ Fort Worth), McKesson (DE; HQ Irving), Caterpillar (DE; HQ Irving since 2022 relocation from Deerfield IL), Charles Schwab (DE; HQ Westlake), CBRE Group (DE; HQ Dallas), Toyota Motor North America (CA C-corp historically; HQ Plano), HP Inc. (DE; HQ Houston since 2022), Oracle (DE; HQ Austin since 2020 then back to Nashville 2024), Kimberly-Clark (DE; HQ Irving). The pattern is overwhelming: 90%+ of TX-headquartered F500 are Delaware corps that foreign-qualified in Texas under TBOC § 9.001. Form Texas corp only if: (a) you are a licensed professional required to form a Texas Professional Corporation under TBOC Title 7 Chapter 301; (b) your industry requires Texas domicile (state-chartered banking under Finance Code, certain Texas-licensed insurance under Insurance Code); (c) you are bootstrapping and have zero plans for VC, M&A, or out-of-state expansion. For most growth-stage Texas founders, Delaware C-Corp + Texas foreign qualification is the stronger structure — DGCL governance, Court of Chancery, VC readiness, and the same Texas franchise-tax exposure as a TX-chartered corp.

Does Texas have a Court of Chancery equivalent?

Yes — but it is brand new. Senate Bill 27 of the 88th Legislature Regular Session (2023), signed by Governor Abbott on June 9, 2023, created the Texas Business Court — the first specialized commercial-litigation trial court in Texas history. The court became operational on September 1, 2024, with judges appointed by the Governor and confirmed by the Senate to two-year terms. Jurisdiction is limited to: (a) qualifying actions ≥ $5 million in controversy; (b) certain corporate governance disputes, fiduciary-duty claims, and securities matters under TBOC; (c) cases voluntarily moved by both parties or by court approval; (d) actions in 11 designated divisions covering the major metro areas (Dallas, Houston, Austin, San Antonio, Fort Worth). The Texas Business Court is structured as a trial court (not an appellate body), and appeals go to the Fifteenth Court of Appeals (also created by SB 27, sitting in Austin). The Court is much younger than Delaware's Court of Chancery (dating to 1792) — there is no settled body of Texas Business Court opinions yet. For a $500M exit, Delaware's Chancery bench still matters more for predictability. But the existence of a specialized Texas business court has begun to materially change the calculus for Texas-domiciled growth companies who want a Texas forum without giving up specialized commercial expertise.

What goes into a Texas Certificate of Formation?

Under TBOC § 3.005, Texas Certificates of Formation for a for-profit corporation must state: (1) corporate name containing "Corporation", "Company", "Incorporated", or "Limited" (or abbreviations Corp., Co., Inc., Ltd.) under TBOC § 5.054; (2) purpose (use the broad TBOC § 2.003 default "to engage in any lawful business" — do not restrict); (3) period of duration (default perpetual under TBOC § 3.003); (4) name and address of the registered agent + registered office in Texas under TBOC § 5.201 (the registered office MUST be a Texas street address, not a P.O. Box; the agent must accept service in person during business hours); (5) number of authorized shares + par value or no-par designation; (6) names and addresses of the initial directors (no minimum number — TBOC § 21.403 requires only one director, can be the sole shareholder); (7) name and address of the organizer. Optional but near-universal under TBOC § 21.401–21.601: director liability limitation (§ 21.401(a)(7)), indemnification authorization (§ 21.601), preferred stock blank-check authorization. The director-liability-limitation clause under TBOC § 7.001(b) is Texas's equivalent of DGCL § 102(b)(7) — include it in the initial Certificate to avoid an amendment later. Filing fee is a flat $300 + $25 optional 24-hour expedite + $5 SOS service charge for online filing through SOSDirect. Texas does NOT charge a per-share organization tax like New York — share count is unrestricted and free.

Do I need a registered agent in Texas?

Yes. Under TBOC § 5.201, every Texas corporation must continuously maintain a registered agent and a registered office in Texas. The registered office must be a physical Texas street address (no P.O. boxes, no commercial mail receiving agency boxes), open during normal business hours to accept service of process. The registered agent can be: (a) an individual Texas resident with a Texas street address, OR (b) a domestic or foreign corporation, LLC, or LP authorized to transact business in Texas with a Texas registered office. Failure to maintain a registered agent or office triggers involuntary forfeiture of charter under TBOC § 11.251 after the Comptroller and Secretary of State send notice and the corporation fails to cure within 90 days. Texas does NOT have a default Department of State agent-of-service designation (unlike New York under BCL § 305(a)) — you cannot rely on the state to receive process for you. Eleet AI provides a licensed Texas registered agent located in Mandeville/Houston/Austin/Dallas, included in the $599 all-in formation. Year-2-onward registered agent service is $100/year flat (vs the $99–$299/yr range from national competitors).

What is a Texas Professional Corporation and who needs one?

Under TBOC Title 7 Chapter 301, certain Texas-licensed professionals who want corporate-form practice must form a Professional Corporation (PC) — a special variant of the for-profit corporation governed by both TBOC general corporation provisions AND profession-specific licensing rules. Covered professions enumerated in TBOC § 301.003 include: physicians, surgeons, optometrists, podiatrists, chiropractors, dentists, veterinarians, attorneys (subject to State Bar approval under TBOC § 301.0035 — but most Texas attorneys form Professional Limited Liability Companies under TBOC Chapter 304 instead), CPAs (Texas State Board of Public Accountancy, TBOC § 301.0035), architects (Texas Board of Architectural Examiners, TBOC § 301.0035), engineers (Texas Board of Professional Engineers, TBOC § 301.0035), surveyors, real estate brokers, and several others. Key rules: (a) corporate name must include "Professional Corporation" or "P.C." under TBOC § 301.005; (b) every shareholder must be licensed in the profession the corporation practices (TBOC § 301.007) — a non-licensed family-trust shareholder is prohibited; (c) the Certificate of Formation must include statements verifying licensure; (d) shareholder disqualification triggers a mandatory share buyback within a reasonable period under TBOC § 301.012; (e) professional liability is NOT shielded — the PC only limits non-malpractice vicarious liability under TBOC § 301.010; (f) most Texas medical professionals form Professional Associations (PA) under TBOC Chapter 302 instead — a unique Texas-only entity type. Note for attorneys: Texas attorneys who want corporate-form practice typically form a Professional Limited Liability Company (PLLC) under TBOC Chapter 304 or a Professional Association (PA) under Chapter 302 rather than a PC, because the PLLC/PA structures provide stronger asset protection without sacrificing the malpractice-liability principle.

How long does it take to form a Texas corporation?

SOSDirect online filing through the Texas Secretary of State portal at direct.sos.state.tx.us processes in 1–3 business days for standard filings — among the fastest state SOS turnarounds in the United States. Paper filings mailed to the Corporations Section at P.O. Box 13697, Austin, TX 78711-3697 (or hand-delivered to 1019 Brazos St., Austin, TX 78701) take 5–10 business days depending on backlog. Optional 24-hour expedite under TBOC § 4.151 is $25 — but is rarely necessary because standard SOSDirect processing is already next-business-day in most cases. Texas does NOT offer paid same-day or 2-hour expedite tiers (unlike Delaware's 1-hour $1,000 tier or New York's 2-hour $150 tier) — the expedited tier is the only paid acceleration available, and Texas SOS does not run a backlog problem like New York Department of State currently does. For VC-stage timing where you have a term sheet in hand, no expedite is usually needed in Texas; standard SOSDirect filing returns the same business day in many cases. Eleet AI defaults to no expedite for Texas filings to save the $25; if you need 24-hour guarantee, we add it at checkout for $25.

What about Texas sales tax — does it apply to my corporation?

Texas imposes a 6.25% state sales tax under Tax Code § 151.051 on the retail sale of taxable items + an optional local sales tax up to 2.0% (capped combined at 8.25%) under Tax Code § 321.103. Cities + counties + special-purpose districts can each levy their own local rate. Practical examples: Houston combined rate 8.25% (6.25% state + 1.0% city + 1.0% MTA Metro), Dallas combined 8.25% (6.25% state + 1.0% city + 1.0% DART), Austin combined 8.25%, San Antonio combined 8.25%, Fort Worth combined 8.25%. The 8.25% combined cap means most Texas urban customers see the same effective rate; rural counties may see lower local components and net 6.75% or 7.25%. SaaS and software-as-a-service ARE taxable in Texas under Comptroller Rule 34 TAC § 3.330 — a TX corp selling cloud subscriptions to TX customers must collect Texas sales tax (the Texas Comptroller has aggressively pursued this position since 2018). Out-of-state SaaS sellers must register and collect once they cross $500,000 in TX sales (economic nexus, Tax Code § 151.107). Sales tax registration is via the Comptroller WebFile separate from the SOS Certificate of Formation. Texas does NOT have a New Mexico-style Gross Receipts Tax — sales tax is buyer-side, applied only on retail sales of taxable items, and exempts most B2B sales of components or resale items.

Can a Texas corporation be a single-shareholder, single-director entity?

Yes. Under TBOC § 21.403, a Texas corporation may have a single director — there is no minimum board size requirement. The same person may also serve as the sole shareholder, sole director, and sole officer (President, Secretary, Treasurer can all be the same individual). This is materially simpler than California Corp Code § 312(a) which prohibits the President from also serving as Secretary in single-shareholder situations (CA still allows it but with quirky rules). Texas has no equivalent restriction. The single-shareholder Texas C-Corp is a common structure for solo-founder Texas businesses that want corporate form (e.g., for retirement plan favorability, IRS reasonable-comp salary structure, or potential future fundraising path) without the LLC operating-agreement complexity. The PIR will list the single individual as both director and officer; this is fully compliant. For Section 1244 stock and qualified small business stock (QSBS) under § 1202, the Texas corporation must still meet the standard federal requirements (active trade or business, ≤ $50M aggregate gross assets at issuance, etc.) — Texas state structure does not affect federal QSBS eligibility either way.