If you would like to form a business in the state of Texas, it is important to understand all of the rules involved. You do not want to make a mistake when filing and end up with a difficult situation. One of the most important things to do is understand what sort of entity you are looking to create. The majority of persons who are starting businesses are starting for-profit entities. That is, they expect to generate and keep profit from the venture. However, if you are not seeking to start a profitable entity, you may wish to form a non-profit corporation. According to the state of Texas, a non-profit corporation is a corporation where none of the income generated is kept by officers, directors, or members of the entity.
However, if you are forming a non-profit entity, it is important to understand that “non-profit” is not the same thing as “tax-exempt.” Even if an entity in Texas is correctly filed as a non-profit entity, that entity may still need to pay taxes. If you are starting a non-profit entity that should be tax-exempt, that entity needs to meet specific requirements laid out both by the IRS and the Texas Comptroller of Public Accounts. Then, you will need to file paperwork to claim tax-exempt status.
It is also important to know that under Texas law, persons who are in control of the non-profit corporation are referred to as members. These individuals have similar status in the non-profit as shareholders would in a profitable company. All non-profit corporations are assumed to have members. In the event that your non-profit corporation does not involve members, you must note this in the certificate of formation.
