If you own a business that was created in a state other than Texas, you will need to qualify or register that business in Texas if you want to do business there. Here is an overview of the rules on how to qualify your foreign (non-Texas) limited liability company (LLC) to do business in Texas.
Note: Unlike other states, Texas does not have laws specifically for registering foreign LLCs. Instead, Texas has a set of laws that cover registration of foreign businesses generally. Texas law refers to these businesses collectively as “foreign entities.”
For Texas purposes, if your LLC is formed in another state, then it is known as a foreign LLC in Texas. In other words, foreign doesn’t mean from another country. Instead, it means your business was organized under the laws of another state. A domestic LLC, on the other hand, is one that is formed in the state where it is doing business. This is common usage throughout the United States. For example, an LLC formed in Indiana is a foreign LLC in Illinois.
According to Texas foreign entities laws, you are required to register your foreign LLC with the state of Texas if you are “transacting business” in Texas. What does this mean? Well, like most states, Texas law does not specifically define the phrase “transacting business” in relation to foreign registrations.
However, state laws governing when foreign companies must collect state sales tax in their state provide some guidance on the issue. Under these laws, a business must have a physical presence in—or nexus with—the state in order to be required to collect state sales tax on sales to that state’s residents. Generally speaking, physical presence and nexus are synonymous, and mean having:
Certain exceptions may apply and the rules can get more complicated with things like Internet sales. Nevertheless, in general, if you have an office, a store, a warehouse, or employees in another state, you will need to qualify your LLC as a foreign company in that state. For more details, including some possible distinctions between physical presence and nexus, check Nolo’s articles on Internet Sales Tax: A 50-State Guide to State Laws. In addition, the Texas Secretary of State has two webpages with information about when foreign entities must register.
Like most states, Texas law for foreign businesses specifies certain activities that do not constitute doing business in the state. The items listed include:
For the full, legal description of each of the items, check Section 9.251 of the Texas Business Organizations Code. The rules regarding acquiring and collecting debts, in particular, are relatively complicated. The law contains a statement that the foregoing list is not exclusive. In other words, other activities beyond those listed above also may be exempt.
If your LLC’s only activity in Texas is one or more of the listed items, you should not need to register with the state.
To register your business in Texas, you must file an Application for Registration of a Foreign Limited Liability Company with the Texas Secretary of State (SOS). You can download a copy of the application form from the SOS website.
To complete the application, you must provide more or less the same information that you need to create an LLC in your home state. More specifically, for a Texas application for registration, you need to provide:
If you need to use an assumed name in Texas, you must file an assumed name certificate (Form 503) and otherwise comply with the state’s rules for assumed names.
You must file the application in duplicate. The filing fee is $750.
If your LLC does business in Texas without being registered, it cannot bring a lawsuit in any of the state’s courts. In addition, the LLC will be subject to a civil penalty equal to all the fees and taxes it should have paid if it were registered plus additional penalties, interest, and late filing fees. However, not being registered does not invalidate your LLC’s contracts or prevent your LLC from defending a lawsuit in Texas. Also, a member or manager of the LLC is not liable for the LLC’s debts, obligations, or liabilities solely because the company did business in Texas without being registered.
If your business is organized as a corporation rather than an LLC, the rules and requirements for foreign qualification in Texas are essentially the same. See the Texas Secretary of State website for forms, information, and filing instructions for registering a foreign corporation in Texas.