Corporation
A Texas for-profit corporation under TBOC Title 2, Chapter 21, a separate legal entity owned by shareholders, governed by a board of directors, and managed day-to-day by officers appointed by the board.
A Texas for-profit corporation is a separate legal entity formed by filing a certificate of formation with the Texas Secretary of State under TBOC Title 2, Chapter 21. The corporation is owned by shareholders (who hold stock representing equity ownership), governed by a board of directors elected by the shareholders, and managed day-to-day by officers appointed by the board.
The three-tier governance structure
Shareholders own the corporation, vote on fundamental corporate transactions and election of directors, and receive dividends when declared. Subchapter H governs shareholder meetings.
Board of directors manages or directs the management of the corporation. Subchapter I (§§ 21.401–21.418) governs board structure, election, term, removal, vacancies, and meeting procedures.
Officers execute board policy and manage day-to-day operations. Subchapter F (§§ 21.301–21.305).
The shareholders' agreement option
§§ 21.101–21.110 permit shareholders to enter into an agreement that may eliminate the board of directors entirely, restrict the discretion or powers of the board, govern dividend distributions, control share transfer, govern the resolution of deadlocks, and address dissolution and termination. § 21.101(a). This makes Texas corporations significantly more contractually flexible than many practitioners assume.
Director and officer fiduciary duties
Texas corporate fiduciary duties are not codified in the TBOC. They are common-law duties developed through Texas Supreme Court decisions and the Fifth Circuit's interpretation of Texas law. See Fiduciary Duty. The certificate of formation may, under § 7.001, eliminate or limit the personal liability of directors for breach of the duty of care.
The 2024–2025 corporate-governance overhaul
House Bill 19 (88th Leg., 2023; eff. Sept. 1, 2024) created the Texas Business Court and Fifteenth Court of Appeals. See Texas Business Court.
Senate Bill 29 (89th Leg., 2025; eff. May 14, 2025) made the most significant changes to Texas corporate-governance law in a generation. SB 29 (a) codified the business judgment rule for publicly-traded and opt-in Texas for-profit corporations at new § 21.419; (b) authorized ownership-threshold restrictions on derivative standing at new § 21.552(a)(3) (capped at 3% of outstanding shares); (c) limited attorney's fees recovery for disclosure-only derivative settlements at new § 21.561(c); (d) narrowed shareholder books-and-records inspection rights at amended § 21.218; (e) authorized exclusive-forum clauses in governing documents at amended § 2.115; (f) authorized jury-waiver provisions in governing documents at new § 2.116; and (g) extended fiduciary-duty elimination authority to limited partnerships at new § 152.002(e). Most SB 29 protections do not apply automatically to private corporations, the corporation must affirmatively opt into the relevant provisions.
House Bill 40 (89th Leg., 2025; eff. Sept. 1, 2025) reduced the Texas Business Court's amount-in-controversy threshold from $10 million to $5 million for most categories of corporate-governance and fiduciary-duty disputes.
Despite the dominance of LLCs in new Texas entity formation, the for-profit corporation remains the standard structure for businesses that anticipate going public, raising venture capital, granting incentive stock options, or operating with a traditional board governance model. The corporation's structural rigidity, relative to the LLC's contractual flexibility, is sometimes a feature rather than a bug. The combined effect of the Texas Business Court (operational since September 1, 2024), the SB 29 corporate-governance reforms (effective May 14, 2025), and HB 40's threshold reduction (effective September 1, 2025) is to position Texas as a serious competitor to Delaware as a state of corporate domicile for the first time in modern history.
Companion article: Starting a Business in Texas