Texas Business Attorney

Business Organizations Center - Frequently Asked Questions

Q: What is the difference between S Corporations and C Corporations?

A: The S Corporation form avoids the "double taxation" that C corporations face, while still allowing the other benefits of incorporation. All corporations are C Corporations by default. If a corporation meets the statutory requirements for S Corporations, such as no more than 75 shareholders, all of whom are U.S. citizens and residents, the corporation need only fill out a Form 2553 to convert to an S Corporation.

Q: What is the difference between Limited Liability Companies (LLCs) and S Corporations?

A: The main difference is that the LLC form is much less regulated than the S Corporation. For example, LLCs do not have the same meeting and record-keeping requirements as S Corporations, and there is no limit on how many members an LLC can have. The two forms are basically the same with regard to how they are taxed and the protection against personal liability that they afford.

Q: What do "piercing the corporate veil" and "alter ego liability" mean?

A: "Piercing the corporate veil" is the name of the doctrine that courts have often invoked to abrogate the protection against personal liability that corporate shareholders and LLC members generally enjoy. That is to say, there are times when a court will allow a plaintiff to seize the personal assets of a corporate shareholder or LLC member to satisfy the corporation's or company's liability. "Piercing the corporate veil" is rarely invoked, and typically only in cases of fraud or sham situations in which the business's operations and funds are so indistinguishable from those of the individual owners that the court deems it unfair to treat the business as a separate entity.

Q: How do I restructure my business as an LLC?

A: In most states, you will need to fill out and file a form or an application to become an LLC. If your existing business is a partnership, you may have to announce in a newspaper that the partnership is dissolving. Also, any permits or licenses in the business's name must be changed to the new name.

Q: What does a "registered agent" do, and do I need one?

A: A registered agent is a person or business designated to serve as a business's contact for the Secretary of State and other agencies and to receive any legal documents that are served on the business. Corporations and LLCs are required to have registered agents because they cannot receive such documents in their own names.

Q: Does my corporation need special permission to do business in other states?

A: Yes, you do. In most states, corporations from other states simply need to file the appropriate form with the Secretary of State in which they wish to conduct business. Filing this paperwork also ensures that no other business in the state may use the corporation's name.

Q: Is it advantageous for corporations to be based out of Delaware or Nevada rather than their home states?

A: No, there is not. At one time, it was clearly advantageous for many businesses to incorporate in either Delaware or Nevada due to various regulations that were less strict in those states. Today, however, regulations are more or less comparable in any two given states. That is why most new corporations now simply incorporate in their home states.

Q: What defines a non-profit corporation?

A: A non-profit corporation is one that does not operate for the end goal of making profits, but for some philanthropic or educational purpose. Non-profit corporations do not pay state or federal taxes.

< Back to Business Organizations Center


Centrally located in the Arboretum area of north Austin, the Slater & Kennon law firm represents clients in Travis County, Bastrop County, Burnet County, Williamson County, and Hays County, including the cities of Austin, San Marcos, Bastrop, Burnet, and Georgetown.