Relocating a Business to Texas

June 07, 2016

relocating_a_business_to_texas.jpgBusinesses move all the time. If you are moving, whether to Texas or to another state, you may want to relocate your business as well.

Texas' Favorable Business Climate. Texas' regulations, taxes and incentives may be more advantageous to your business than in other states. In addition, Texas has a favorable franchise tax policy. Businesses with total annualized revenue less than or equal to the no tax due threshold are not required to pay franchise taxes. Currently, this threshold is $1,080,000.

Relocating a Business. The requirements for moving your business to Texas involve almost the same legal and regulatory steps as starting a business.

Sole proprietorships and partnerships can move easily. Usually all that is required is to file an assumed name certificate or DBA (“doing business as”) in Texas.

Moving an entity, such as a corporation or a limited liability company, to Texas is a more involved process. Which option you choose depends on the up-front and on-going costs as well as the legal hassles involved.

  1. Register as a Foreign Entity. If your business is organized in another state but is transacting business in Texas, it is required to register as a “foreign entity” in Texas. Generally, a company is transacting business in Texas if it has an office or an employee in Texas or is otherwise pursuing one of its purposes in Texas. You may decide to continue operations in your existing state and register as a foreign entity in Texas. This can be an expensive option over time if you do not intend to continue operations in your original state since your company will be required to pay an annual fee of $750 to the Texas Secretary of State in order to maintain its status as a registered foreign entity.
  2. Form a New Entity in Texas. Another option is to terminate your business in your existing state and form a new business in Texas. This may be the most economical option, but the business will probably be required to operate under a new federal EIN number.
  3. Conversion. For continuity reasons, many business owners prefer to convert their existing businesses to Texas businesses. For a cross-jurisdiction conversion to be effective, the jurisdiction where your company was originally registered must permit the transaction and you must comply with the conversion laws in both that state and in Texas. The process is a little tricky and involves coordinating various filings in the existing state and in Texas. In addition, the business’s name must be available in Texas and you will need to adopt a Plan of Conversion, which authorizes moving the business from the current state to Texas. A big benefit of a conversion is being able to keep your company’s EIN number.
  4. Merger. If your existing state does not permit conversion, you may want to consider a merger. The process involves setting up a new entity in Texas and then merging your existing entity into it.
  5. Conversion of Foreign Entity. Finally, if your business is currently registered as a foreign entity in Texas and you decide to convert it to a Texas entity, you are still required to follow the rules for conversion. Once the conversion is complete, the foreign entity registration in Texas is automatically withdrawn.

Similarly, if you are moving from Texas to another state, you may want to relocate your business to that state. You will have to comply with the registration requirements in that state.

Remember:

  • Alert clients and suppliers of the move.

  • Update your address with all marketing materials including website, business cards, Facebook account and Twitter account.  

  • Update your online address with various search resources such as Google Places, Yelp, Chamber of Commerce, Bing Places, Yahoo Local and Angies List.

  • Update your name, address, phone and other pertinent information with the licensing and taxing entities.

  • Update any local paid search campaigns to cover the new area you are moving to.

  • Tell referral sources that you’ve moved.

Topics: Legal

Kathy Tremmel

Tremmel Law

Kathy Tremmel has significant experience both as a business attorney and corporate executive. Her career spans both legal practice and business management and she opened her own solo law practice in January 2010. In additional to running her own practice, she also is of Counsel with Selman, Munser & Lerner, which is a business transaction law firm in Austin, Texas. Ms. Tremmel has more than 10 years’ experience as a business attorney, providing transactional legal services to a diverse client base, from start-up ventures to well established companies. She helps companies with all their contracts, including customer agreements, non-compete agreements, employment agreements, buy-sell agreements, loans, and leases, helps people set up new businesses, and represents buyers and sellers of businesses. In addition, Ms. Tremmel has 10 years of management experience working with start-up companies. As VP of Operations at Tusker Group, an international litigation support company, Ms. Tremmel led international teams, managed production and quality issues, handled price negotiations, worked closely with clients to determine the scope of their projects, provided project management services, and developed, implemented and documented best practices for processing and training. Ms. Tremmel earned a Doctor of Jurisprudence from the University of Colorado School of Law and a Bachelor of Arts from Dartmouth College. She is a Texas licensed attorney and a certified Project Management Professional.
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