RELOCATING YOUR BUSINESS ENTITY TO TEXAS

By: Allen T. May, C.E.O. of Westwood Associates, LLC

It seems that every week I am reading in The Wall Street Journal, The New York Times, or some other news media covering businesses relocating their entire enterprise to the State of Texas. The reasons are obvious and endless of course, but the process of effectively doing so are not. Many entrepreneurs choose to cut ties with the state they are leaving if they will no longer be providing products and/or services in that state. In doing so, it alleviates those entrepreneurs from having to file quarterly and annually reports as well as pay taxes with the state they have left. However, if you are leaving one state for another but plan to continue to operate in the state you have moved from, then that’s another matter to consider. For the sake of this blog posting, however, we will assume you are leaving a state for a new life in Texas, as thousands do each year.

If you completely move your corporate offices from your home state to Texas, you have one of three options to consider. You may continue as a corporation in your old state and register as a “foreign” corporation doing business in Texas with the Texas Secretary of State. In doing so, you will be required to file quarterly and/or annually reports to both states. Something to consider for sure. Alternatively, you can dissolve your corporation fully in your old state and form the corporation again in Texas, as a new entity. There are many pros and cons to this option and careful consideration should be made in this area. Lastly, you may do a reorganization, in which you form a new company in Texas and “merge” your old corporation/LLC with it.

If you’ve chosen to operate your business as a Limited Partnership, LLC, or a corporation, you will register with the State of Texas, Office of the Secretary of State, Corporations Section. This requirement is in play regardless which of the above three options you select.

If you’ve decided to operate your business as a sole proprietorship or general partnership, you will need to file an “Assumed Name Certificate” also known as a “DBA” (doing business as) for the name or names of your business. The county clerk where your business will be domiciled in Texas will issue this certificate. Fees vary from county to county, but expect to pay around $15.00 per dba certificate you file, which, is valid for up to 10-years before you will be required to file a renewal with the county clerk’s office. Worth noting, if your business will not have a physical location, you must file a DBA in every Texas county it will operate. For example, a pool company located in Houston, Texas and operating as a sole proprietorship (NOTE: THERE IS A HUGE RISK FACTOR FOR THIS GUY WITH REGARDS TO LIABILITY, BUT THAT’S ANOTHER BLOG POST) would have to file a DBA under the business name it is operating under in Harris County, as well as Montgomery County should it service customers in The Woodlands. First, you have to check the local county records to ensure no one else is currently using the business name you want and its good policy to go ahead and check that name in all surrounding counties before you commit to it. Otherwise, expect a cease-and-desist letter from the attorney representing the other company using the same or similar name you’ve chosen.

Additionally, if your business will be operating out of your home, you must check zoning regulations and product restrictions in order to legally operate. Some municipalities can get very serious about this matter. If your business or product is trademarked, you may need to register it again. Businesses that sell their goods and services only in Texas must register their marks with the State of Texas. Those doing interstate business must register federally.

Texas is one of the top 10 states for lowest overall tax burdens, as residents do not have company tax or individual income tax, Unless your company has an annual revenue north of $1,000,000.00, you may well be exempt form other types of tax as well. For more information on this matter, you can visit the website of the Texas Comptroller of Public Accounts.

Should you decide to dissolve your existing out of state corporation and start fresh with a Texas corporation or LLC, then an aged Texas shelf entity may be the best choice for you. Consider this. Lets assume you owned a general contracting business in California for the past 3 years and decided one day that the outrageous California tax system coupled with its shamefully over burdened business regulatory system was simply more than you could take. So, you relocate to state income tax free Texas. The facts are that you have three solid years of experience running a general contracting business and your have references regarding your quality of work. You can merge those credentials and talent into one of our aged Texas shelf companies that matches your credentials. Hence, you would simply acquire one of our 3-year old corporations or LLCs and hang your shingle in the Great State of Texas!

Please reach out to me if you have any questions regarding this process. You can reach me as follows:

Allen T. May
cell: 214-893-2623
email: allentmay@gmail.com