Starting a business is an important step that requires proper planning, accurate registration, and a clear understanding of compliance requirements. Our company formation services are designed to guide entrepreneurs and business owners through each stage of the registration process, ensuring their business is correctly established and prepared to operate from day one.
We provide structured, reliable support to help simplify the process and allow our clients to focus on building and growing their businesses with confidence.
Business Entities Registered with the State of Texas
The State of Texas recognizes and registers legal business entities, not tax elections. When forming a company, the state determines the legal structure of the business, which defines liability protection, ownership framework, and governance rules.
We assist with the registration of the following entity types with the Texas Secretary of State:
Limited Liability Company (LLC)
An LLC is a flexible legal entity that provides personal liability protection to its owners while allowing simple management and adaptable tax treatment. It is one of the most commonly used structures for small and medium-sized businesses.
Corporation
A corporation is a separate legal entity with a more formal structure, suitable for businesses that plan to grow, reinvest profits, or attract investors. Corporations follow defined governance rules and offer strong liability protection.
These are the only entity types registered at the state level. Any tax-related classification is determined separately at the federal level.
Registering a business with the Texas Secretary of State establishes the company’s legal existence and confirms its entity type. This step is required before any federal registrations or tax elections can take place.
We assist with the preparation and filing of all required state documents, ensuring accurate information and proper classification of the business entity.
Federal Registration – Internal Revenue Service (IRS)
After state registration is completed, federal registration is required to properly identify the business for tax and reporting purposes. This includes obtaining an Employer Identification Number (EIN), which is necessary for banking, payroll, and federal tax compliance.
We assist clients throughout this process to ensure the business is properly recognized at the federal level from the start.
Federal Tax Classification and IRS Elections
Once the business is legally registered with the State of Texas, the Internal Revenue Service (IRS) determines how the entity will be treated for federal tax purposes. This is known as federal tax classification, and it is independent of state registration.
For example, an LLC registered with the state may be taxed in different ways depending on the IRS classification selected. Similarly, a corporation may elect a specific tax treatment if it meets eligibility requirements.
We assist clients in understanding and completing the appropriate federal registrations and elections to ensure the business is properly classified for tax purposes.
Single-Member LLC (IRS Classification)
A Single-Member LLC is an LLC with one owner. For federal tax purposes, the IRS generally treats a single-member LLC as a disregarded entity, meaning the business income and expenses are reported directly on the owner’s personal tax return unless another election is made.
This classification applies only at the federal tax level and does not change the legal structure registered with the state.
Partnership (IRS Classification)
When an LLC has two or more owners and no special election is made, the IRS typically classifies it as a partnership for tax purposes.
Under this classification, the business files an informational return, and profits or losses are passed through to the owners according to their ownership percentages. Like single-member status, partnership is a federal tax classification, not a state-registered entity type.
S-Corporation Election (IRS Only)
An S-Corporation is not a legal entity registered with the State of Texas. It is a tax election made with the IRS by an eligible LLC or corporation.
This election allows business income and losses to pass through to the owners’ personal tax returns while maintaining the existing legal structure registered with the state. Eligibility requirements apply, and the election must be approved by the IRS.
We assist clients in evaluating and completing the S-Corporation election when appropriate.
C CORPORATION (C-Corporation by default)
A corporation is a separate legal entity with a formal governance structure and strong liability protection. By default, a corporation registered with the State of Texas is treated as a C-Corporation (C-Corp) for federal tax purposes, unless an alternative tax election is made with the IRS.
As a C-Corporation, the business is taxed at the corporate level, and shareholders are taxed separately on distributions. This structure is often used by businesses planning to reinvest profits, scale operations, or attract outside investors.
These entity types represent the legal structures recognized by the state. Any modification to how they are taxed is handled exclusively at the federal level.
Understanding the distinction between state entity registration and federal tax classification is essential when forming a business. By properly addressing each step — from legal formation with the State of Texas to IRS tax elections and sales tax registration — businesses can establish a solid and compliant foundation. Our goal is to guide clients through this process with clarity and structure, helping them move forward with confidence and long-term stability.