Texas Foreign Qualification: Everything You Need to Know
Texas foreign qualification is a simple process if your LLC was created in another state. 3 min read
2. Texas Law
3. Foreign Entity Exceptions
4. Required Information
Texas Foreign Qualification
Texas foreign qualification is a simple process if your LLC was created in another state. If you own a company created in Texas, you must qualify or register the company in the state if you wish to conduct business in Texas.
Note: Unlike other states, Texas does not have laws tailored for the registration of foreign LLCs. Rather, Texas has laws that refer to the registration of foreign entities.
In general, Texas refers to foreign LLCs as foreign entities. If your LLC is created in another state, then this is called a foreign LLC in Texas. In this case, foreign does not mean from another nation. Rather, it means that a business was created in another state. A domestic LLC is created in the state. For instance, an LLC created in Texas would be a domestic LLC. Such terminology is also common in other states. For instance, an LLC created in North Carolina is a foreign LLC is California.
According to Texas foreign entity laws, you must register your foreign LLC with Texas officials if you intend to conduct business in the state. What would this mean? It means that Texas law does not provide a strict definition of a business transaction regarding foreign registration.
With that, state laws that govern when foreign businesses must collect state sales taxes in their respective states provides a measure of guidance on the matter. Under such laws, a company must have a physical address or nexus in a state to collect sales taxes from the residents of that state. Nexus and physical presence can mean the following:
- Warehouses in the state
- Offices in the state
- Stores in the state
- Sales reps in the state
Exceptions vary, and the rules can get more complex when online sales are involved. Regardless, if you have a store, warehouse, or employee presence in other states, you would have to qualify the LLC as a foreign entity in that state. Moreover, the Texas Secretary of State has two online sources of information regarding when foreign entities should register.
Foreign Entity Exceptions
Texas law details various activities that would not qualify as conducting business:
- Settling or defending court cases
- Dealing with internal company matters in the form of manager or member meetings
- Holding a bank account in Texas
- Voting interests regarding an entity that your business acquired
- Selling via independent contractors
- Collecting or securing various debts
- Conducting limited transaction that can be finished within 30 days and is not during repeat transactions.
Other stipulations apply, and you should check with state authorities for the full exceptions. Other activities beyond such rules could also fall under exemption. If your company’s sole activity within Texas is one or more of the mentioned items, you do not have to register in Texas. To register a company in Texas, you must apply for Registration of a Foreign Limited Liability Company with state officials. You may download the application from the Texas Secretary of State office website, and you would submit it to SOS officials. To finish the company, you must provide the same information you need to create the LLC in the home state.
The full name of the LLC is required, as stated in the articles of organization. Moreover, you must include the following pieces of information:
- Your LLC’s employer identification number (EIN)
- The date when the LLC was created
- The state where the LLC was registered
In addition, you must include a statement certifying that the LLC exists as a valid business entity under the laws in which it was registered. Also, you need a statement of purpose that your company will pursue business activities in Texas, including a statement that an LLC has authorization to pursue such reasons under the laws of the state where it was created. Further, include the date in which the LLC first conducted business, or the date when your business will begin business activity in Texas. From there, include the mailing address of the LLC and the company’s primary office address. Also, note the address of the registered agent in Texas. List at least one person who will be the governing individual of the LLC. This can be a manager or member.
To learn more about Texas foreign qualification, you can post your job on UpCounsel’s website. UpCounsel’s lawyers will help you successfully register your business in Texas and will help you familiarize yourself with Texas law on foreign LLC maintenance. In addition, they will give you more information if you’re considering registering a business entity in Texas or any other state.