Doing Business in Texas as a Foreign Corporation

Kaitlin Edwards | Jan 17, 2024

Doing Business in Texas as a Foreign Corporation

The mark of a successful business is their ability to grow. If you want to expand your continued success into other markets across the United States, there may be situations where you’re required to register as a foreign corporation.

Each state has its own rules and regulations regarding when a business should register as a foreign corporation. Here’s what you should know about expanding your business into Texas.

What Does It Mean To Be a Foreign Corporation?

It’s easy to assume that a foreign corporation would be a business that is formed overseas doing business in the United States. The term “foreign corporation” is much less exotic in the United States.

If your family owns a taco restaurant in New Mexico and you decide to jar and sell your own salsa through a canning facility you’ve leased in Austin, Texas, you’ve become a foreign corporation in Texas. You don’t need to travel the globe to be a foreign corporation — you only need to travel one state away.

If your business becomes as successful as you’ve always hoped it would, you may begin to branch out and conduct business outside of your home state. Foreign qualification is the process of registering to conduct business in a state other than the state where you founded and initially registered your business.

Who Needs To File as a Foreign Corporation To Conduct Business in Texas?

Foreign qualification isn’t always a requirement — it’s often a business decision. Every state has different rules and regulations regarding what constitutes doing business within that state. The state of Texas doesn’t have a specific definition of “transacting business” on its books, which can make the situation slightly less straightforward.

Texas specifically lists a few things that do not qualify as transacting business in Texas, such as working with an independent contractor who lives and works in the state of Texas when your business is registered in another state. In that scenario, the independent contractor would be conducting business in their own state, and your corporation would be conducting business in your own state. This removes the requirement to file as a foreign corporation in the state of Texas.

Guidelines in Texas generally recommend filing for a foreign corporation only if the state of Texas is directly tied to the operation of your business that was established out of state. Hiring a full-fledged employee in Texas and leasing or renting a property for the purpose of doing business in Texas are prime examples.

The state of Texas doesn’t provide legal opinions about foreign registration requirements. The Secretary of State suggests that businesses should consult with their legal team about whether or not it would be necessary to register as a foreign corporation in Texas.

What Are the Penalties for Failing To Register as a Foreign Corporation?

The state of Texas imposes penalties on businesses that fail to register as a foreign corporation in Texas when it’s necessary to do so.

Here are the penalties for failing to properly register:

  • Inability to utilize Texas courts for business purposes
  • Penalty for all fees and taxes that would have been due at the time of foreign corporation registration
  • Late fees for filing 90 days or more after transacting business in Texas
  • Statewide business injunction

Any decision that could potentially jeopardize your ability to transact business in another state would be poor. It’s best to abide by the state of Texas’s opinion that corporations should consult with their legal teams about when filing as a foreign corporation would be necessary.

How Much Does It Cost To File as a Foreign Corporation in Texas?

The fee to file as a foreign corporation in Texas is $750 for the majority of entities. Cooperative associations and nonprofit organizations can file at a significantly reduced rate of $25.

Late filing fees and penalties are based on these filing fees, and they can add up quickly. It’s a sound business decision to take a proactive approach to filing before conducting business in Texas if your business is registered outside of the state.

Do Foreign Corporations in Texas Have Annual Fees?

There is no annual fee for foreign corporations in Texas, but you are required to file annual reports. Businesses registered as foreign corporations in Texas are required to have a registered agent, and you may encounter annual fees from your registered agent.

In a roundabout way, this technically implies the presence of an annual fee. Failing to maintain your relationship with your registered agent may negatively impact your ability to conduct business in Texas.

Do You Have To Pay Texas Business Taxes as a Foreign Corporation?

Businesses operating as foreign corporations in Texas may have to pay income taxes on certain types of income and franchise taxes if applicable. You’re also required to comply with state tax and sales tax laws when applicable.

How To Register as a Foreign Corporation in Texas

Registering as a foreign corporation in Texas is a multi-step process that begins with hiring a registered agent and ends with filing your official paperwork. It’s important to follow each step correctly to avoid paying fines or fees for filing late or filing improperly.

1. Hire a Texas Based Registered Agent

When filing as a foreign corporation in Texas, you’ll need to hire a Texas-based registered agent for your business. A registered agent is a person or an organization you allow to receive government mail or notices on your behalf. Your registered agent will help you maintain your business relationship with the state of Texas.

In some states, using a registered agent is optional. It’s mandatory in Texas, and you cannot register as a foreign corporation if you don’t have a registered agent. Mosey can serve as your registered agent in the state of Texas at no additional charge.

2. Appoint the Texas Secretary of State as the Agent for Service of Process

Some statutes in Texas require that the Texas Secretary of State be appointed as the agent for Service of Process. This means that the Texas Secretary of State will receive any legal or civil papers on your behalf that may be served to your Texas business.

This assures that foreign corporations in Texas have a formal way to be contacted for legal purposes, even if a member of the corporation isn’t physically present within the state.

3. Determine Business Name Availability in Texas and File Assumed Name Certificates With Secretary of State

When you register your business in Texas, your business needs to be registered under a name distinct from the name of any other business in Texas. If the name you’re currently using is available and distinct enough, you’ll be able to continue using it in Texas. The Texas Secretary of State has the final say in determining if your name is eligible. If it isn’t, you may need to modify the name of your business.

When your business name is approved, the next step is to file assumed name certificates with the Secretary of State. This will help you receive your name certificate and validate any DBA information you’ll need to operate in Texas.

4. Provide Proper Citation of the Business Type

Provide the proper paperwork that states what type of business you operate. You may use the certificate of formation for your limited liability company (or a comparable document for your business structure) in your home state for this step. Your filing in the state of Texas must match your original business filings from your home state exactly.

5. File Texas Form 301 (Application for a Foreign For-Profit Corporation)

Form 301 is the official paperwork you need to file to register as a foreign corporation in the state of Texas. Complete the paperwork and include all necessary attachments and supporting documents. Filing fees are due at the time you file your paperwork.

Please note that the process is slightly different for a Limited Liability Limited Partnership in Texas. An LLLP requires registration both as a Limited Partnership and a Limited Liability Partnership.

Compliance as a Foreign Corporation in Texas

Compliance is one of the most important considerations a small business must make, whether assuming operations as normal in their home state or expanding into a new state like Texas. Remaining compliant with rules and regulations is what ultimately allows a business to thrive.

Mosey provides businesses with the tools they need to automate compliance. Our solutions allow you to focus on running your day-to-day operations while compliance issues are simplified in the background.

We can also act as the registered agent you need when you want to begin doing business in Texas as a foreign corporation, as well as help you get registered with the Texas Secretary of State. Sign up with Mosey now to make running your business simpler.

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