Bringing an existing company into Texas
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- You
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- Blaga Veleva, EA
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- Foreign entity registration
A company formed outside Texas, whether in another state or another country, must file an application for registration with the Texas Secretary of State before it transacts business here. LLCs use Form 304 and for-profit corporations use Form 301. Tax & Business Solutions in Houston prepares the registration, acts as your Texas registered agent, and sets up the tax side.
Does your out-of-state company have to register in Texas?
Yes, if it "transacts business" here. The SOS explains that a foreign filing entity must file an application for registration when it transacts business in Texas, and that "generally, a foreign entity is transacting business in Texas if it has an office or an employee in Texas or is otherwise pursuing one of its purposes in Texas" (Texas SOS foreign entity FAQs). Texas law lists activities that do not count, and the SOS cannot rule on a specific case, so borderline situations deserve a conversation with your legal counsel.
In Texas, "foreign" simply means formed anywhere outside Texas, including Delaware or Florida.
Which form do you file?
It depends on the type of entity. From the Secretary of State's forms list (Texas SOS forms):
- Form 304: Limited Liability Company Application for Registration.
- Form 301: For-Profit Corporation Application for Registration.
- Form 305: Professional Limited Liability Company Application for Registration.
The SOS says applications for registration "can be filed online through SOSPortal 24 hours a day, 7 days a week."
Do non-U.S. companies have to register too?
Yes. The Secretary of State says "non-U.S. corporations, LLCs, LPs and financial institutions must register with the secretary of state before transacting business in Texas," and that they "are subject to state franchise tax and federal income tax on certain income" (Texas SOS). For the federal side, see U.S. taxes for foreign companies. Many overseas owners decide instead to form a new Texas company as a subsidiary; Blaga compares both routes with you.
What else does a registered foreign company need?
A Texas registered agent and office, kept current, because a foreign entity's registration can be revoked if it fails to maintain them. The firm can be that registered agent at its FM 1960 West office. The company also files the Texas franchise report each May 15 (Texas Comptroller), and its federal return reflects its Texas activity. Opening a Texas bank account is often next, covered on the U.S. bank account page.
What if the company has already been doing business here?
Register now rather than later. The SOS lists the consequences: an unregistered foreign entity "cannot maintain an action, suit, or proceeding in a Texas court until it registers," faces a civil penalty equal to the fees and taxes it would have paid had it registered on time, and, after more than 90 days of doing business, a late filing fee for each calendar year of delinquency (Texas SOS). Bring the dates the company first had an office, staff or sales activity in Texas, and the registration can be prepared with the correct history. Earlier franchise tax years may also need attention, which is business tax work the firm handles.
How does the firm handle a registration?
In four steps. First, confirm the entity type and whether the company is transacting business in Texas, and since when. Second, gather the home jurisdiction's formation documents and the officers or managers who will be named. Third, arrange the Texas registered agent and prepare the correct application. Fourth, after approval, set up the Texas franchise account, the federal tax picture and the books, so the company's first Texas report is filed on time.
Questions people ask
Q1How does an out-of-state company register in Texas?
It files an application for registration with the Texas Secretary of State: Form 304 for an LLC, Form 301 for a for-profit corporation. It must also name a Texas registered agent with a physical Texas address.
Q2Is registering a foreign LLC the same as forming a new Texas LLC?
No. Registration lets your existing company do business in Texas under its home-state formation. Forming a new Texas LLC creates a separate company. Which is better depends on taxes, liability and where the owners are.
Q3Does a foreign entity owe Texas franchise tax?
Yes. The Secretary of State says non-U.S. entities transacting business in Texas are subject to state franchise tax, and the Comptroller applies the tax to taxable entities doing business in Texas.
Q4Can a company formed outside the U.S. register directly in Texas?
Yes. The Secretary of State says non-U.S. corporations, LLCs, LPs and financial institutions must register before transacting business in Texas, using the same application for registration as out-of-state companies.
Q5Do we have to register just to sell to Texas customers online?
Not necessarily. Whether a company is transacting business in Texas depends on what it does here. The Secretary of State says it generally means having an office or an employee in Texas, or otherwise pursuing one of its purposes here, and Texas law lists activities that do not count. The SOS cannot give an opinion on a specific company, so borderline cases belong with legal counsel.