Search Site
Menu
When a Texas Business is Required to Register in a Different State

Texas Picture

The use of social media and e-commerce has allowed even the smallest of small business retailers to market and sell goods outside of their home state.  In fact, many “one-person shop” retailers that rely solely on distribution through popular e-commerce platforms such as eBay and Etsy attribute the majority of total annual revenue to sales made outside of their respective home states.  And with so many of our Texas-based small and midsize clients following suit—and even marketing through social media sites such as Facebook, Twitter and Instagram—a question that we are increasingly asked, “Do I have to register my business in California [or insert your state of choosing here] if I am doing business in  California [or insert your state of choosing here]”  The answer, like many legal questions, is not a firm “Yes” or a solid “No”, but rather a tepid “it depends”.

Each state in the U.S. has very specific laws and regulations outlining when a company that is transacting business in that state (the “Host State”) through an entity that was not formed in the Host State (a “Foreign Entity”) is required to register the Foreign Entity in the Host State.  In Texas, these regulations are contained in Section 9.001 of the Texas Business Organizations Code (the “Code”).  While each Host State’s rules differ slightly, most states’ regulations on foreign registration are fairly similar to that of the Texas Code.

Unfortunately, the Code does not explicitly define what “transacting business” actually encompasses in Texas, and, therefore, leaves open the question of when registration is actually required.  The Code does, however, in Section 9.251 provide a list of activities that do not, in and of themselves, constitute transacting business in Texas. Therefore, an entity does not have to register in Texas if the following are the only activities that take place in Texas: filing a lawsuit, maintain a bank account, entering into a contract with an independent contractor, collecting a debt, conducting an isolated and non-repeating transaction within 30 days, or only owning real estate in Texas.

On the flipside, activities that are likely to be deemed as transacting business in Texas, and therefore requiring registration, include the following activities: maintaining an office or having ongoing operations in Texas, having employees in Texas, having items that are delivered to customers in Texas using company-owned vehicles, maintaining inventory in Texas or manufacturing items in Texas.  As with the aforementioned negative list, this list is not all-inclusive or dispositive, but rather provides certain factors that could be used when determining both whether an entity is transacting business in a Texas, and, by extension, whether said entity needs to register in Texas.  Again, while each state’s rules will differ slightly, the factors used in Texas are also used in most Host States in determining whether an entity must register in the Host State based on the business that it is transacting.

The potential penalties for failing to timely register your foreign entity in the Host State can be significant. As such, it is critical if your business is operating in a state other than the state in which it was formed that you discuss with your attorney whether or not those activities trigger additional registration requirements.  At the Strong Firm P.C. we pride ourselves in helping many of our clients navigate these sometimes nebulous registration requirements, and, when necessary, complete that foreign registration process—we would be more than happy to assist you in any of your registration needs.

Eric R. Thiergood, Sr.

Phone: 281-367-1222

Fax: 281-210-1361

[email protected]

Leave a Reply

Your email address will not be published. Required fields are marked *

Contact a Dedicated Texas Business Lawyer To Schedule a Consultation
Call 281-367-1222 or contact us online to schedule a meeting.

Strong In Action

  • Spring 2019

    The Strong Firm represents borrower in $42.3 million HUD construction loan for multifamily real estate development in Walton County, Florida.

    Read More
  • Spring 2019

    The Strong Firm acts as legal counsel for borrower in $32.1 million HUD construction loan for multifamily real estate development in Conroe, Texas.

    Read More
  • Spring 2019

    The Strong Firm aids borrower in $31.7 million HUD construction loan for multifamily real estate development in Nueces County, Texas.

    Read More
  • Spring 2019

    The Strong Firm represents borrower in the refinancing of a $3.57 million commercial mortgage-backed security for a commercial office facility in Montgomery County, Texas.

    Read More
  1. 1
  2. 2
  3. 3
  4. 4
  5. 5
  • Peer Rated 2021 Award
  • Clio Client-Centered Certification

Recent Blog Posts

COMMUNITY AND SEPARATE PROPERTY IN TEXAS: OWNERSHIP AND CONTROL

COMMUNITY AND SEPARATE PROPERTY IN TEXAS: OWNERSHIP AND CONTROL Texas law characterizes property acquired by spouses either community or separate property when property is acquired, and this characterization has tremendous consequences. w defines a spouse’s "separate property" as: (1) property owned or claimed by the spouse before marriage; (2) property acquired during
Read More
COMMUNITY AND SEPARATE PROPERTY IN TEXAS: OWNERSHIP AND CONTROL

Scams in Times of Disaster and Emergency

Scams in Times of Disaster and Emergency While Texans are generally prepared for major weather-related disasters during hurricane season from June through October, occasionally a rogue weather event, such as an artic blast, sweeps across the state causing severe and unanticipated property damage to residential and commercial properties. As individuals and
Read More
Scams in Times of Disaster and Emergency

Legislation Authorizes Paid Sick Leave for Workers Suffering from Coronavirus

New legislation passed in response to the COVID-19 pandemic allows certain workers to receive paid sick leave even if their employer previously did not provide it. In March, the federal government enacted the Families First Coronavirus Response Act (FFCRA). This law assists employers that give their employees paid time off
Read More
Legislation Authorizes Paid Sick Leave for Workers Suffering from Coronavirus

Lenders Suspend Home Foreclosures Due to COVID-19, But What Happens Next?

Many large financial institutions are suspending foreclosures because of the massive economic damage caused by COVID-19. Some banks have stopped proceedings indefinitely. Others have set time limits for foreclosure suspensions such as 60 or 90 days. Even as health and financial issues remain uncertain, this is a good time for
Read More
Lenders Suspend Home Foreclosures Due to COVID-19, But What Happens Next?
  • Video Vault


    Watch videos done by our legal team to gain a better understanding of your legal needs. Our lawyers give video insight into areas such as Real Estate, Business Law, Mergers & Acquisitions and much more.
Contact us

Quick Contact Form