Foreign or Out-of-State Entities
Notice: Businesses performing disaster- or emergency-related work: Certain out-of-state businesses who enter the state to perform disaster- or emergency-related work in this state during a disaster response period are exempt from the requirement to register as a foreign entity pursuant to Chapter 112 of the Business & Commerce Code. If your out-of-state business is exempt, you may choose to file a notification statement with the secretary of state. Please see Form 3901 (PDF) for out-of-state businesses and Form 3902 (PDF) for affiliates of in-state businesses. All exemptions under Chapter 112 of the Business & Commerce Code cease at the end of the disaster response period. The secretary of state cannot advise you regarding whether your business qualifies for an exemption under Chapter 112.
For information regarding state tax issues for out-of-state businesses assisting with recovery, please see the Texas Comptroller of Public Accounts website.
Whether an entity is domestic or foreign does not depend on the location of the principal business office. Instead, it depends on where the entity was formed and what law governs its internal affairs. If an organization was formed under, and the internal affairs are governed by, the laws of a jurisdiction other than Texas, the organization is a "foreign entity." We sometimes refer to foreign entities as out-of-state entities to reinforce the concept that entities formed in other U.S. states are foreign entities, as well as entities formed outside of the United States.
Registration Requirements
Section 9.001 of the Texas Business Organizations Code (“BOC”) requires the following types of foreign entities to file an application for registration with the Texas secretary of state if the entity is “transacting business” in Texas:
- corporations;
- limited partnerships;
- limited liability partnerships;
- limited liability companies;
- business trusts;
- real estate investment trusts;
- cooperatives;
- public or private limited companies;
- any other foreign entity that, if formed in Texas, would be formed as a corporation, limited partnership, limited liability company, professional association, cooperative, or real estate investment trust; and
- any other foreign entity that affords limited liability under the law of its jurisdiction of formation for any owner or member.
Other laws or circumstances may also be reasons for registration.
- Section 201.102 of the Texas Finance Code requires an out-of-state financial institution to register with the secretary of state before opening a branch or other office in Texas.
- It has been the practice of the Texas Department of Insurance to refuse a non-resident agency license for a foreign entity unless the entity has registered with the secretary of state. HB 2503, passed in the 2011 Legislative Session, removes this requirement effective 09/01/2011.
- Some banks will not do business with an unregistered foreign entity, despite that BOC § 9.251 states that maintaining a bank account in this state is not, in and of itself, transacting business in Texas.
Name Requirements
A foreign entity registering to transact business in Texas must register under a name that:
- contains a recognized term of organization for the entity type as listed in sections 5.054 to 5.059 of the BOC;
- does not contain any word or phrase that indicates or implies that the entity is engaged in a business that the entity is not authorized to pursue; and
- is available in Texas, that is, is distinguishable in the records of the secretary of state from the name of any existing domestic or foreign filing entity, or any name reservation or registration filed with the secretary of state.
View our name availability rules.
You may request a preliminary name availability determination by calling (512) 463-5555 or by email.
Registration Under a Fictitious Name
If the entity's legal name does not meet the above requirements the entity must register in Texas under an assumed name (d/b/a). This special type of assumed name is often referred to as a fictitious name.
- A fictitious name is a special type of assumed name because, unlike other assumed names, a fictitious name must meet the above requirements.
- A foreign entity that registers to transact business under a fictitious name is stating that the entity will transact business in Texas under that name. BOC § 9.004.
- A foreign entity registering under a fictitious name must file assumed name certificates with the secretary of state (Form 503 (Word 125kb, PDF 74kb)).
Where to file assumed name certificates.
The name requirements for registration to transact business in Texas do not affect trademark or other intellectual property rights. A certificate of registration or assumed name certificate does not authorize use of the name in violation of another person’s legal rights and does not, in and of itself, offer any trademark protection. See Trademark FAQs for more information.
Determining Whether to Register
Texas statutes do not define "transacting business." Helpful resources to determine whether an entity's activities in Texas require registration include:
- BOC § 9.251, which lists activities that are not considered transacting business;
- Case law from Texas and other U.S. jurisdictions regarding foreign qualification;
- Texas Attorney General Opinions; and
- Private attorneys familiar with corporate law.
Another helpful resource may be the comptroller's Texas Nexus Questionnaire (PDF), used by the comptroller to determine if a foreign entity is "doing business" in Texas for tax purposes.
- The threshold level of activity required for a tax nexus is generally lower than the threshold level of activity that requires registration with the secretary of state.
- Therefore, if the Texas Nexus Questionnaire results in a determination of "no nexus," the entity is probably not transacting business in Texas either.
- On the other hand, if the Texas Nexus Questionnaire results in a determination of "nexus," the entity should consider registration.
- Remember that, for registration with the secretary of state, the Texas Nexus Questionnaire can be a useful tool, but does not give a definitive answer.
Don't forget that even if you determine that your entity is not transacting business in Texas under the BOC, you may need to register under other law, such as the Insurance or Finance Codes.
No member of the secretary of state staff can determine whether an entity is transacting business in Texas or needs to file an application for registration. Determining whether to register is a business decision that may have tax consequences, raise legal issues, or impact licensing from another agency or state board.
Penalties for Not Registering
Failure to register can result in penalties, including:
- Inability to maintain an action, suit, or proceeding in a Texas court until registration;
- Injunction from transacting business in Texas;
- Civil penalty equal to all fees and taxes that would have been imposed if the entity had registered when first required; and
- Late filing fees owed to the secretary of state by an entity registering more than 90 days after first transacting business in Texas.
How Do I Calculate My Late Filing Fees?
Late filing fees are determined by multiplying the number of whole or partial calendar years that have passed since the date the entity initially transacted business in Texas times the registration fee.
- For nonprofit corporations and cooperative associations, the registration fee is $25.
- For all other entities, the registration fee is $750.
- Example: A for-profit corporation that has been transacting business in Texas since June 1, 2007 would owe $3,000 in late filing fees if registering on December 1, 2010. The total fees due with the application for registration would therefore be $3,750.
(The following entity types are not charged late fees for years prior to 2006: professional corporations, professional associations, business trusts, real estate investment trusts, and other foreign entities not required to register under prior law.)
Try Our Late Fees Calculator! (XLS, 63kb)
Limitation of Late Fees
If your entity will be assessed more than five years of late penalties, and you meet certain criteria, you may request that the secretary of state limit the fees you owe. The secretary of state will cap the late fees at five years for an entity that (1) submits evidence of an active right to transact business with the comptroller's office; and (2) certifies to the truth of the following statements:
- The entity has satisfied all of its franchise, sales, and other tax obligations with the Texas Comptroller of Public Accounts. Attach a screen print from the comptroller's office showing the entity has a status of "active right to transact business".
- The entity does not owe any other taxes, fees, or assessments that are administered by any other Texas state agency.
- The entity has not received a letter from the Office of the Secretary of State regarding the need to submit an application for registration, or if it has received such a letter, it has responded to the secretary of state within 45 days.
The general policy of the secretary of state is that we do not waive late fees for foreign entities, aside from the five year fee cap, if applicable. If an entity believes it has unique circumstances and wishes to appeal the assessment of late fees, the appeal shall be in writing and may be sent by email, fax to 512-475-2781 or mail to P.O. Box 13697, Austin, TX 78711-3697, Attn: Corporations Attorneys.
Special Issues for Limited Liability Limited Partnerships (LLLPs)
A foreign limited liability limited partnership transacting business in Texas must apply for two certificates of registration. An LLLP transacting business in Texas must register as both a limited partnership and as a limited liability partnership.
- Form 306 (Word 167kb, PDF 126kb) – Limited Partnership Application for Registration
- Form 307 (Word 115kb, PDF 67kb) – Limited Liability Partnership Application for Registration
Other Issues for Foreign Entities in Texas
Texas Taxes
- If an entity has failed to file franchise tax reports and/or pay franchise taxes, it is invited to contact the comptroller to determine if the entity qualifies to enter into a Voluntary Disclosure Agreement.
- Overview of Taxes Collected by the Texas Comptroller of Public Accounts
- Unemployment Tax Collected by the Texas Workforce Commission
Permits and Licenses
There is no general business license in Texas; however, depending upon the type of business the entity engages in, additional licensing requirements from other Texas agencies might apply.
- Texas Department of Licensing and Regulation
- Find Business Licenses & Permits (SBA.gov)
- Historically Underutilized Business Program
- Texas Government Portal
Employer Issues
- Texas Workforce Commission: Information on requirements when you have Texas employees.
- Texas Department of Insurance: Information about the Texas workers’ compensation system.
- Texas Attorney General Employer Information Center: Information about employer new hire and termination reporting requirements.
Ready to Register?
- Register Online
- Registration Forms (for submission by fax, mail, or hand delivery)