Foreign Entity Registration in Texas
A new client messaged me recently to ask about foreign entity registration of her Washington state Limited Liability Company (WaLLC) in Texas. While the ‘how” of registering a foreign entity in Texas is an easy question to answer. The ‘why’ and ‘when’ question of foreign entity registration in Texas are more important.
Q: When is Foreign Entity Registration Required in Texas?
Requirements for registering your foreign entity in Texas is generally governed by Texas Business Organizations Code (“BOC”) Chapter 9. Foreign financial institution registration may be governed by the Texas Finance Code.
The first question you have to answer for yourself is whether your foreign business is the type of entity for which the state of Texas requires registration.
The BOC is very comprehensive in listing out the types of entities may be required to register to transact business in Texas.
Do I own the type of entity that requires registration?
In general, the following foreign entities must register in order to “transact business” in Texas
As I said above, the ‘how’ of registering your foreign entity is the easy part. The Texas Secretary of State Office provides all the forms and some detailed instructions on how to fill out the forms right on its site. For your convenience, you can also download the form you need by clicking the corresponding link in the list of entities above.
What does “Transact Business” mean?
Rather than list out all the activities that qualify as “transact[ing] business” the legislature created an non-exclusive list of activities that DO NOT constitute transacting business. In other words, doing any of the following activities does not require foreign entity registration.
- maintaining or defending an action or suit or an administrative or arbitration proceeding, or effecting the settlement of:
- such an action, suit, or proceeding; or
- a claim or dispute to which the entity is a party;
- holding a meeting of the entity’s managerial officials, owners, or members or carrying on another activity concerning the entity’s internal affairs;
- maintaining a bank account;
- maintaining an office or agency for:
- transferring, exchanging, or registering securities the entity issues; or
- appointing or maintaining a trustee or depositary related to the entity’s securities;
- voting the interest of an entity the foreign entity has acquired;
- effecting a sale through an independent contractor;
- creating, as borrower or lender, or acquiring indebtedness or a mortgage or other security interest in real or personal property;
- securing or collecting a debt due the entity or enforcing a right in property that secures a debt due the entity;
- transacting business in interstate commerce;
- conducting an isolated transaction that:
- is completed within a period of 30 days; and
- is not in the course of a number of repeated, similar transactions;
- in a case that does not involve an activity that would constitute the transaction of business in this state if the activity were one of a foreign entity acting in its own right:
- exercising a power of executor or administrator of the estate of a nonresident decedent under ancillary letters issued by a court of this state; or
- exercising a power of a trustee under the will of a nonresident decedent, or under a trust created by one or more nonresidents of this state, or by one or more foreign entities;
- regarding a debt secured by a mortgage or lien on real or personal property in this state:
- acquiring the debt in a transaction outside this state or in interstate commerce;
- collecting or adjusting a principal or interest payment on the debt;
- enforcing or adjusting a right or property securing the debt;
- taking an action necessary to preserve and protect the interest of the mortgagee in the security; or
- engaging in any combination of transactions described by this subdivision;
- investing in or acquiring, in a transaction outside of this state, 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; or
- owning, without more, real or personal property in this state.
It’s important to remember that the list is not exclusive. This means you should always check with your lawyer to see if your fact-specific activity requires registration or not.
So that’s it?
No. Registration, like business formation, is just the FIRST STEP in doing business in Texas. Foreign entities registered in Texas must also maintain a registered office and agent in Texas. There may also be annual forms that must be filed in order to maintain your registration. Failure to register or maintain your registration will subject you to civil fines and limit your ability to file lawsuits or arbitration over disputes in Texas in your entity’s name.
Both registered agent and franchise tax forms are services we provide to our clients as part of an annual Entrepreneur Legal Services Plan.
For more information on our Value-based legal services, including foreign entity registration, please Click to Call
[Photo credit: Andrew Steele]