How to Qualify as a Foreign Business in Texas

Learn the rules for qualifying your LLC to do business in Texas.

By , Attorney

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."

What is a Foreign LLC?

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.

Transacting Business in Texas

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:

  • a warehouse in the state
  • a store in the state
  • an office in the state, or
  • a sales representative in the state.

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.

Certain Activities Are Exempt

Like most states, Texas law for foreign businesses specifies certain activities that do not constitute doing business in the state. The items listed include:

  • defending or settling a lawsuit
  • dealing with internal business affairs such as holding member or manager meetings
  • having a bank account in the state
  • having an office, agency, or persons in the state for handling your company's own securities
  • voting the interest of an entity your LLC has acquired
  • selling through independent contractors
  • creating, as borrower or lender, or acquiring indebtedness or a mortgage or other security interest in real or personal property
  • securing or collecting certain debts
  • transacting business in interstate commerce
  • conducting an isolated transaction that is completed within thirty days and is not in the course of similar, repeated transactions
  • in certain circumstances, acting as an executor or administrator of an estate, or as a trustee under a will or trust
  • investing in or acquiring, in a transaction outside of Texas, a royalty or other nonoperating mineral interest
  • executing a division order, contract of sale, or other instrument incidental to ownership of a nonoperating mineral interest; and
  • owning, without more, real or personal property in Texas.

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.

Application for Registration

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:

  • the full legal name of your LLC as stated in its formational document (usually the articles of organization)
  • if necessary, the assumed name under which your LLC will operate in Texas (an assumed name is necessary if your LLC's original name or something very similar is already in use by another Texas registered business, or the original name does not meet the state's LLC naming requirements because it lacks the words "limited liability company," "limited company," or an abbreviation of those terms)
  • your LLC's federal employer identification number (EIN)
  • the state where your LLC was organized
  • the date when your LLC was formed
  • a statement that, at the time of filing, you certify that your LLC exists as a valid LLC under the laws of the state where it was formed
  • a statement of the purpose your LLC will pursue in Texas and a statement that the LLC is authorized to pursue such purposes under the laws of the state where it was organized
  • the date on which your LLC first transacted, or will transact, business in Texas
  • the street and mailing address of your LLC's principal office
  • the street address of your LLC's initial registered agent in Texas
  • a statement that your LLC consents to having the Texas Secretary of State receive service of process (legal filings) per Section 5.251 of the Business Organizations Code (covering situations where you do not have a registered agent, your registered agent cannot be located, or your LLC's registration has been revoked)
  • the name and address of at least one "governing person" for your LLC (usually members or managers), and
  • an authorized signature.

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.

What Happens if You Don't Register?

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.

Check the Secretary of State's two webpages regarding foreign entities for additional information.

Registering a Foreign Corporation in Texas

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.

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