You formed a company in another state and now you want to begin doing business in Texas.
What do you need to do? How do you register your Texas foreign corporation?
What are the consequences if you fail to qualify your foreign corporation in Texas?
These are good questions that show you are thinking ahead. You can get the answers from the experienced foreign corporation attorney at The Curley Law Firm.
What Is a Texas Foreign Corporation?
Generally, the state law in which a corporation was formed and does business governs the company. For example, state business laws may dictate things like:
- How corporations are named;
- How and when annual meetings must be held;
- Whether officers may be held personally liable; and
- How income will be taxed.
If you formed your corporation under Texas law by filing a certificate of formation with the Texas Secretary of State, your company is a Texas domestic corporation. However, if you created your corporation outside of Texas under the business laws of another state or country, your company is a Texas foreign corporation.
Importantly, whether your corporation is a domestic or foreign entity does not depend on the location of your principal business office or where all your employees are located. Foreign corporation status instead depends entirely on where your business entity was formed and what law governs its formation and business affairs. As long as your corporation was formed under the laws of a jurisdiction other than Texas (i.e., another state or country), your company is an out-of-state or foreign corporation in Texas.
When Must My Corporation Get Texas Foreign Qualification?
To transact business in Texas, a foreign corporation must qualify or register with the Texas Secretary of State’s office. So what does it mean to “transact business” in Texas for purposes of triggering foreign corporation qualification? The Texas Business Organizations Code does not define what constitutes transacting business in the state. But there are several circumstances that might qualify.
You Have an Office in Texas
Typically, if your corporation has an office or one or more employees located in Texas, your company will be considered to be transacting business in the state.
You’re Fulfilling a Corporate Purpose in Texas
In addition, if your foreign corporation pursues one or more of its stated purposes in Texas, it will be transacting business in the state. Corporate purpose statements may include specific business purposes, such as to develop, manufacture, and sell oil and gas extraction equipment. Or your purpose statement may be very general, such as “any lawful activity permitted under the laws of the state.” Whether the purpose is specific or general, if your foreign corporation is engaged in any corporate purpose within Texas, it will need to seek Texas foreign corporation qualification.
When Do I Not Need a Foreign Corporation Registration?
Interestingly, while the Texas business statutes do not define what constitutes “transacting business” in the state, it does list fifteen activities that are not considered transacting business in Texas. These activities do not trigger foreign-corporation registration in Texas. Some of the more common activities that do not constitute transacting business in Texas include:
- Owning real estate in Texas (without more activities);
- Having a Texas bank account;
- Being involved in a lawsuit, arbitration, or administrative proceeding in Texas;
- Holding a corporate meeting in the state; or
- Conducting an isolated business transaction in Texas.
Even if your foreign corporation does not meet the “transacting business” requirement, there may be other circumstances or laws that may require you to seek Texas foreign corporation registration. For example, foreign financial institutions and insurance agencies may need to register with the Texas Secretary of State even without meeting the “transacting business” threshold.
It can be tricky to determine whether your foreign corporation must seek foreign qualification in Texas so it is important to consult with The Curley Law Firm before engaging in any activities in the state.
What Is the Texas Foreign Corporation Qualification Procedure?
You’ve determined your foreign corporation will be transacting business in Texas and it needs to register as a Texas foreign corporation. But what is the Texas foreign corporation registration or qualification process?
The foreign corporation qualification process begins with filing an application to transact business in Texas with the Texas Secretary of State. The state provides a variety of applications depending on whether the foreign corporation is for-profit, non-profit, a professional corporation, etc., but all generally require the following information:
- Corporation name (which must comply with the corporate naming convention required by Texas law);
- Type of corporate entity;
- Federal Employer Identification Number;
- Where and when the corporation was formed;
- Statement that the corporation exists as a valid foreign corporation under the laws where it was formed;
- Each business or activity that the entity expects to pursue in the state (which may be stated as “any lawful business or activity under the law of this state”);
- Date that the foreign corporation began or will begin to transact business in Texas;
- Principal office address;
- Name and address of the initial registered agent and office for service of process;
- Appointment of Secretary of State as an agent of the foreign corporation for service of process under certain circumstances; and
- Name and address of each of the foreign corporation’s governing persons.
The foreign corporation registration application must be signed by a governing person or managerial official who is authorized to act on behalf of the corporation. A filing fee (currently $750 for a for-profit corporation) must accompany the completed and signed application.
Penalties for Failing to Register Your Texas Foreign Corporation
If your foreign corporation transacts business in Texas without qualifying, it may face penalties, late fees, and other adverse consequences. These include:
- An injunction by the Texas Attorney General to prevent your foreign corporation from transacting business in Texas;
- Civil penalties that are equal to all fees and taxes (with interest) that would have applied to your corporation if you had registered when required;
- Late filing fees for each calendar year (full or partial) in which your foreign corporation transacted business in Texas but failed to qualify as a Texas foreign corporation; and
- Inability to file a lawsuit or proceeding in a Texas court.
In addition to these penalties for failing to register a foreign corporation, the Texas Secretary of State may revoke a foreign corporation’s prior registration following notice of certain delinquencies by the foreign corporation, such as
- Failing to pay its filing fee with its application (or any associated penalties or fees);
- Not maintaining a registered agent/office in the state;
- Failing to file required reports; or
- Forgetting to amend its foreign corporation registration when it changes its name, address, agents, or other legally required information.
An attorney can help you monitor these requirements to ensure that your registration stays up to date.
Why Consult With The Curley Law Firm for Your Texas Foreign Corporation Qualification?
At The Curley Law Firm, we are experienced at handling the Texas foreign corporation qualification process for all types of corporations regardless of size or industry. We know how to determine if your company is “transacting business” in Texas, thereby triggering the registration procedure. We can complete and file the necessary application to allow you to begin your company’s work in Texas.
We know when you need to file an amended registration application. And if your foreign corporation registration is denied or revoked, we can help correct any deficiencies so that you may legally engage in Texas business activities. Contact us today.