Everything in Texas is large-scale, from the sheer quantity of people to the small companies that serve them. Nearly 5 million people in the state are employed by more than 3 million small enterprises that make up 99.8% of all businesses in the state. Texas is one of the best states to launch a business, with Houston, Dallas, and Austin included. In this article, we’ll walk you through how to start your own business in Texas and highlight the steps you need to take.
What It Means to Operate as a Foreign Corporation?
A "foreign corporation" is often thought to refer to a company operating in the United States that is based in another nation. However, in the US, it simply refers to a company that is incorporated in one jurisdiction but business in another. Even though a corporation or limited liability company is a domestic entity in its home state, when it conducts business outside of that state, it is regarded as "foreign" in the states in which it operates.
For example, suppose there is a corporation incorporated in California, where it has its main office and headquarters. This corporation is considered a domestic entity in California. If it wishes to expand and open an office or a store in Nevada, it must register as a business in that state. Since it was incorporated in California, Nevada views it as a foreign entity. Despite being based in the U.S. and not abroad, the term "foreign" in this context simply refers to operating across state lines.
Who in Texas Needs to Register as a Foreign Corporation?
It's not always necessary to be foreign qualified; it might also be a wise commercial move. Regulations pertaining to "doing business" within state borders vary throughout states.
Texas makes clear which actions do not qualify as conducting business within the state. For instance, your out-of-state company does not need to register as a foreign corporation in Texas if you hire an independent contractor who lives and works there. The independent contractor is deemed to be conducting business in their own state in this instance, not yours.
According to Texas standards, you should only register a foreign corporation if your out-of-state establishment's primary functions are closely connected to your commercial operations in Texas. Hiring full-time staff in Texas or renting real estate there for commercial purposes are two examples of this.
Since Texas does not offer legal opinions on foreign registration requirements, the Texas Secretary of State recommends that businesses consult with their legal advisors to determine if registering as a foreign corporation in Texas is necessary.
Guide to Foreign Corporation Registration in Texas
Check and Register Your Business Name in Texas
Make sure your company name is unique and hasn't previously been registered by another corporation in Texas before opening for business. The eligibility of your business name will be decided by the Texas Secretary of State. You can keep utilizing your present business name if it fits the requirements and is available. If not, you may need to modify it in order to conform to state laws.
The next step is to file assumed name certificates with the Secretary of State when your business name is approved. Obtaining your business name certificate and formalizing any "Doing Business As" (DBA) information required for your operations in Texas are the two main reasons this step is so important.
Clarify Your Business Type
The appropriate paperwork, specifying exactly what kind of business you run, must be submitted when registering your company in Texas. You can include the certificate of formation from your home state in this documentation, for instance, if you are managing an LLC. Make sure the documents you file in Texas exactly match the ones you filed in your home state. Maintaining legal compliance and recognition across state lines depends on this consistency.
Use Form 301 to Register as a Foreign Business
Form 301 must be filled out and submitted in order for your foreign corporation to be formally registered in Texas. Make sure you accurately complete the form and submit any necessary supporting documents and attachments. Remember that when you submit your documentation, you also have to pay the filing fees.
It's crucial to remember that different business kinds have different procedures. For instance, you must register as both a Limited Partnership (LP) and a Limited Liability Partnership (LLP) if you're establishing a Limited Liability Limited Partnership (LLLP) in Texas. This extra measure guarantees that all legal basis are met in accordance with the state of Texas's regulations.
Pick a Texas Registered Agent
To establish a foreign corporation in Texas, you must work with a registered agent located in Texas. A registered agent is a person or an entity that is permitted to accept official documents and notifications from the government on behalf of your company. Maintaining your company's legal position with the state depends on doing this. In Texas, having a registered agent is mandatory, in contrast to many other states where it is not. Without one, it is impossible to register as a foreign firm.
What Happens If You Don't Register as a Foreign Corporation?
Texas enforces strict penalties on businesses that do not comply with its foreign corporation registration requirements when necessary. If a business fails to register, it loses the privilege of using Texas courts to resolve business disputes. Additionally, the business will be liable for all the fees and taxes it should have paid from the time it started operating in Texas. If the business delays its registration by 90 days or more after beginning operations, it will also face late filing fees.
To prevent such serious consequences, firms need to consult with their legal teams or registered agents in the state to assess whether registration as a foreign corporation in Texas is necessary for compliance with local rules and maintaining uninterrupted operations.