How to Form a Sub S Corporation in Texas

By Joe Stone

The term “Sub S Corporation” is a short for a corporation that has elected to be taxed under Subchapter S of the Internal Revenue Code. To form a Sub S corporation in Texas, you must first create the corporation as required by the Texas Business Organizations Code, and then file the appropriate form with the IRS to elect Subchapter S tax treatment. Corporations that do not make such an election are automatically taxed under Subchapter C of the Internal Revenue Code; they are sometimes referred to as C corporations.

The term “Sub S Corporation” is a short for a corporation that has elected to be taxed under Subchapter S of the Internal Revenue Code. To form a Sub S corporation in Texas, you must first create the corporation as required by the Texas Business Organizations Code, and then file the appropriate form with the IRS to elect Subchapter S tax treatment. Corporations that do not make such an election are automatically taxed under Subchapter C of the Internal Revenue Code; they are sometimes referred to as C corporations.

Step 1

Choose a name for your corporation that does not conflict with, or is too similar to, the name of an existing business registered with the secretary of state's office. You can search the secretary of state's business name database online to search for a name and reserve it. You can call the secretary's office at 512-463-5555 to pre-screen a name and file a written request to reserve it; however, a final determination if that the name is suitable will not be made until you file your documents to form the corporation. The corporate name must include one of certain words or abbreviations: Company, Corporation, Incorporated, Co., Corp., or Inc.

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Step 2

Prepare your corporation's certificate of formation according to the requirements of the Business Organizations Code, which are set forth in an optional pre-printed form available from the Secretary of State's website. The minimum information required to complete an appropriate certificate of formation include the corporation's name, the name and address of the person or company that has consented to act as agent for service of process for the corporation, the name and address of at least one initial director, the number of shares the corporation will be authorized to issue, the purpose for forming the corporation, and the name and address of the organizer of the corporation, or the person filing the paperwork.

Step 3

Prepare the completed certificate of formation for filing with the secretary of state's office by signing and dating the bottom of the certificate and make at least one duplicate copy for filing, along with any additional copies as desired for your records.

Step 4

File the original certificate, one duplicate copy and the appropriate filing fee to the Texas Secretary of State's office located at the James Earl Rudder Office Building, 1019 Brazos, Austin, Texas 78701. The certificate can also be filed by mail addressed to P.O. Box 13697, Austin, Texas 78711-3697. You can also file by fax at 512-463-5709. A fax filing requires submitting credit card information on a fax transmittal form available from the secretary of state website.

Step 5

Apply for an employer identification number, or EIN, which is also known as a tax identification number. The Texas Secretary of State website has a link, "How to Apply for an EIN?" that directs you to the IRS website to apply for your EIN. You can apply online, by phone, mail, or fax.

Step 6

Obtain IRS Form 2553 "Election by a Small Business Corporation" after you receive the duplicate copy of your certificate of formation from the secretary of state indicating the filing date.

Step 7

Prepare form 2553 by inserting the required identifying information for your corporation, such as the name, address and IRS tax identification number, as well as the information regarding tax year and shareholders of the corporation. Sign and date the form where indicated at the bottom of the first page.

Step 8

File the original form 2553 by mail with the IRS or submit it by fax. For Texas residents the mailing address is IRS Service Center Ogden, Utah 84201; the fax number is 801-620-7116.

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