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 (§§ 21.401–21.419) governs board structure, election, term, removal, vacancies, and meeting procedures.
Officers execute board policy and manage day-to-day operations. § 21.417 (board elects a president and a secretary, and may elect other officers under § 3.103).
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 distributions, govern the resolution of deadlocks, and require winding up and termination on request or on a specified event. § 21.101(a). The agreement must be in the certificate of formation or bylaws approved by all shareholders, or in a written agreement signed by all shareholders and made known to the corporation. § 21.101(b).
Director and officer fiduciary duties
Texas corporate fiduciary duties are largely common-law duties developed through Texas Supreme Court decisions and the Fifth Circuit's interpretation of Texas law. Since 2025, § 21.419 has added statutory presumptions and a heightened liability standard for listed corporations and those that opt in. 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) created the Texas Business Court, which took cases commenced on or after Sept. 1, 2024. A separate bill, Senate Bill 1045 (88th Leg., 2023), created the 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) provided that additional or amended disclosures do not count as a substantial benefit supporting a derivative plaintiff's fee award at new § 21.561(c); (d) narrowed shareholder books-and-records inspection rights at amended § 21.218; (e) amended the exclusive-forum provision at § 2.115, first enacted in 2021; (f) authorized jury-waiver provisions in governing documents at new § 2.116; and (g) added § 152.002(e), which lets a limited partnership agreement expressly eliminate fiduciary duties. Under § 152.006, that subsection applies only to partnerships with interests listed on a national securities exchange, though other partnerships are not barred from adopting provisions with the same effect. Several SB 29 provisions, including § 21.419, the § 21.552(a)(3) threshold and the records limits in § 21.218(b-2), reach a corporation without listed voting shares only if it opts in. Others, such as the jury-waiver authority in § 2.116 and § 21.561(c), apply without an election.
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 qualified-transaction, contract and other commercial actions under Tex. Gov't Code § 25A.004(d). Governance and fiduciary-duty actions under § 25A.004(b) already carried a $5 million threshold.
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 give companies a more developed Texas alternative to Delaware as a state of incorporation.
Companion article: Starting a Business in Texas