How to Successfully Complete Foreign Entity Registration in Texas

The requirements for a Texas foreign entity registration are very specific. If you do business in the state, there’s a good chance you’ll need to register. This article defines what a foreign entity is and explains how to file a registration of foreign entity in Texas. We’ll also review the circumstances where you do not have to file. Read this carefully if you’re an out-of-state or internationally-based corporation looking to do business in the Lone Star State.

Which Businesses Must Register as a Foreign Entity in Texas?

Texas law defines a foreign entity as a foreign corporation, limited partnership, limited liability company, business trust, real estate investment trust, cooperative, public or private limited company, or another entity whose formation, if it were done in Texas, would require the filing of a “Certificate of Formation,” according to Chapter 3 of the Business Organization Codes.

In other words, if your company is formed in another state and wants to do business in Texas, you must file for the certificate of foreign entity registration Texas law requires. This document was previously known as an application for a certificate of authority, but that term has a different meaning now. We’ll get into that in more detail below.

Definition of “Doing Business” in Texas

The State of Texas protects home-grown businesses with the same fervency and zeal that cowboys protect their herds. The Lone Star State has a rich history and fierce local pride. Make sure you understand that if you’re going to do business there. Outsiders are not warmly embraced, especially if they don’t follow the rules.

The Texas foreign entity registration form can be found on the Secretary of State’s website under “Foreign or Out-of-State Entities.” You can register online using the SOS Registration Portal or by fax, mail, or dropoff. Contact numbers and mailing addresses can be found on the Contact Page of the Secretary of State’s website.

Which Businesses Do Not Need to Register as a Foreign Entity in Texas?

Your attorney can tell you whether you need a Texas secretary of state foreign entity registration. If you’re unsure, Section 9 of the Business Organization Code has a clear set of guidelines that shows businesses if they do or do not need to register. We’ve included a summary of that list here. You can also research case law from Texas and other US jurisdictions or examine the Texas Attorney General’s opinions on foreign entities.

Scenario #1: Legal Activities

The key differentiator between a business that needs to file the foreign entity registration Texas requires is whether or not the company does transactional business in the state. Legal activities, including actions, suits, claims, and disputes, are not transactional, so your company will not need to register as a foreign entity for legal activities.

Scenario #2: Investment Activities

Transferring, exchanging, or registering securities is not considered a transactional business. It’s an investment activity. Appointing a trustee to manage those securities or voting on the interest of an entity you’ve acquired also falls in this category, as does the creation of debt, indebtedness, or a mortgage on real or personal property.

Scenario #3: Subcontractors

Using subcontractors to make sales or perform services for your company in Texas does not require registration, so you can save the money you’d spend on a Texas foreign entity fee. This rule also applies to interstate commerce or conducting isolated transactions. Texas is strict about business filings, but they’re not unreasonable.

Scenario #4: Banking

Opening a bank account at a Texas bank is not a qualifying transaction for being a foreign entity. Your money can live and work here without paying a registration fee. Your business is subject to these guidelines if you physically move to Texas or open a branch office here and start conducting business by making sales or offering paid services.

Scenario #5: Visitors

According to the American Hotel and Lodging Association (AHLA), there are 6,004 hotels in Texas with 520,916 rooms. Those facilities are used to host hundreds of trade shows and industry conferences in Texas every year. You do not need to register as a foreign entity to attend one of these events or even sell some of your merchandise there.

Foreign Entity Registration in Texas: Step-by-Step

If you want to register a foreign entity in Texas, the first item on your to-do list is to check if you need to do it. Review the information in this article and check the Texas Secretary of State’s guidelines and registration requirements for foreign out-of-state entities published on their website, then complete the following steps:

Step #1: See if Your Business Name is Available in Texas

The name you do business under in another state may not be available in Texas. You can check that using the “Search” function of the Texas SOS website. If your name is unavailable, you may need to file for a new corporate name or DBA (doing business as) with their office. Call the Secretary of State’s office (Dial 711) if you have questions.

Step #2: Obtain a Certificate of Good Standing

As part of Texas's foreign entity registration process, you’ll need to present a certificate of good standing from the state you’re based in. You can call the Secretary of State in that state to obtain this document. In Texas, we now call them “certificates of account status.” Their purpose is to verify your standing with the state revenue department.

Step #3: Hire a Texas-Based Registered Agent

A registered agent is a person or company residing in Texas who is available to accept service of process on your behalf. Several firms offer registered agent services for a fee. You are not required to hire one of them, but a firm specializing in being a registered agent can keep you compliant with state regulations and filing deadlines.

Step #4: File Forms and Pay Filing Fees

Use the Secretary of State’s SOSDirect Link to file your foreign entity registration and pay the necessary fees. The cost is $750 for a for-profit corporation and $25 for a non-profit corporation. We’ll break those costs down further in the next section. You’ll want to read that carefully before proceeding to the next step.

Step #5: Register for Taxes in Texas and Apply For Permits

The Office of the Comptroller in Texas handles taxes. After you register your foreign entity, you’ll need to file Form AP-201, the Sales Tax Application Form. This action is visible as a public record, so don’t be surprised if you start getting calls from sales reps soon after you file the form. You can file online using the comptroller’s eSystems link.

How Much Does it Cost to Register a Foreign Entity in Texas?

The State of Texas charges $25 for a non-profit entity to register as a foreign entity. The fees are significantly higher if you’re a for-profit corporation. The Secretary of State’s office will ask for $750 before they allow you to open your doors. That fee is then due every year after that. If you open before you pay it, you’ll be liable to pay for the time you fail to pay.

Here’s an example: If a for-profit corporation has transacted business in Texas since January 1, 2019, and registers on January 1, 2024, the total fees due with the registration application would be $3,750 ($750 x 5 years). You might also face civil penalties, which are outlined below. This is not a good way to start your business relationship with the state.

A foreign limited liability limited partnership transacting business in Texas must apply for two registration certificates, one for a limited partnership and the other for an LLLP. Use the following forms to register your business if your company is in this category:

• Form 306 (Word 167kb, PDF 126kb) – Limited Partnership Application for Registration
• Form 307 (Word 115kb, PDF 67kb) – Limited Liability Partnership Application for Registration

Texas does not require general business licenses, but other Texas agencies may have additional licensing requirements. Here are some links to those agencies:

• Texas Department of Licensing and Regulation
• Find Business Licenses & Permits (SBA.gov)
• Historically Underutilized Business Program
• Texas Government Portal

Penalties for Not Completing Foreign Entity Registration in Texas

The fees and penalties for not filing a foreign entity registration are outlined in the Texas Business Organizations Code, Section 9, Subchapter B. Specifically, you’re looking for Section 9.052: Civil Penalty. It states that the fees and taxes imposed by law equal whatever was first required had the entity registered on time, plus penalties and interest.

The State Attorney General can sue your company for not filing. That’s rare, and it’s unlikely to happen if you voluntarily admit the mistake and pay all the state taxes your company owes. Until that happens, the following consequences may be in effect:

• Your company will be unable to file legal actions in Texas.
• You could receive an injunction preventing you from transacting business.
• The Secretary of State may charge late fees on fees overdue by ninety days or more.

The Secretary of State can waive late fees for foreign entities if they choose, and their policy caps those fees after five years. If you believe you’re eligible for relief from fees, you can file an appeal in writing by fax or mail. The fax number is 512-475-2781. The mailing address is P.O. Box 13697, Austin, TX 78711-3697, Attn: Corporations Attorneys.

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Helpful Links for Foreign Entity Registration in Texas

• Texas Secretary of State: Foreign or Out-of-State Entities

• Online registration: Texas SOS Foreign Entity Registration

• Other SOS Documents: Business and Nonprofit Forms

• Dos and Don’ts of Foreign Entity Registration: Section 9 of the Business Organization Code