Texas Foreign LLC Compliance
Registering a foreign LLC in the state of Texas does not end with filing one form. A professional in the state of Texas will keep you in compliance every year. This step by step guide is just the first step for a business formed in a state outside of Texas. You must register your foreign LLC with the Texas Secretary of State. The document to complete this task is Form 304. The penalties and late fees are steep if the foreign LLC is not registered correctly with the state.
What is a Foreign LLC in Texas?
The legal name of Form 304 is Instructions for Application for Registration of a Foreign Limited Liability Company. Most people assume a foreign LLC is out of the country. In the state of Texas, a foreign LLC is any business with an initial registration outside the state of Texas. The most common states I have encountered for initial registration are Delaware, Wyoming and Nevada. These states have favorable liability and privacy laws for business owners, but Texas has recently enacted favorable laws to protect the liability shield of business owners.
Did your out-of-state business transact business in Texas before registering or has your existing registration lapsed? Review the Out of State Compliance Services page to resolve state tax holds, clear back penalties, and restore your active standing.
Penalties for Failing to Register the Out of State LLC
A business cannot perform business functions such as sign contracts, hire employees, or sell products without first registering with the Secretary of State. As a CPA in the state of Texas, I have witnessed businesses suffer penalties for failing to register the LLC. Not registering the LLC results in the following:
- not being able to transact business in the state of Texas by action of the attorney general
- may not maintain an action, suit, or proceeding in a court until registered in the state
- Is subject to a civil penalty equal to the all fees and taxes that would have been imposed if the entity has registered when first required
The late fee for failing to register an LLC in Texas is equal to the registration fee for each or part of the year that the LLC transacted business in the state without registering. The current registration fee is $750. The state also grants a grace period of 90 days once the entity begins transacting business in the state. Once the 90 days passes and the LLC is still unregistered, the business is subject to penalties and fees.
How to Complete Form 304
Foreign Entity Name and Type
Enter the full legal name of the out of state LLC as stated in the entity’s formation document. The name must meet the following:
- must contain a recognized term of organization for the entity type
- must not contain any words or phrases that implies the entity is engaged in a business the entity is not authorized to pursue
- entity name must not be the same or deceptively similar to the name of an existing entity, whether domestic or foreign, already filed with the Secretary of State. This also includes entity names already reserved.
The Secretary of State will provide a preliminary determination on name availability. Do not make financial expenditures or execute documents based on this preliminary clearance.
Assumed Names
If the out of state LLC does not contain the LLC designation, the entity name must be updated to include acceptable abbreviations such LLC or LC.
If the name of the out of state entity is not available for use in the state of Texas, the business must complete Texas Secretary of State Form 503 to register an assumed name and subsequently list the assumed name on Form 304.
Federal Employee Identification Number (FEIN)
The out of state’s Federal EIN is not required for the form to be processed by the state of Texas but if provided it does assist the Texas Comptroller with establishing the tax account with the state. If the entity has not received the EIN at the time of submission, check the box on the form. The EIN isssued by the IRS.
Jurisdiction Information & Certification of Existence
Provide the state of formation and date the LLC was originally organized. The certification of existence is a statement that is certified with the signing of Form 304. It states that the out of state LLC is in good standing in the state of formation. In the state of Texas, you do not have to submit a certificate of good standing from the state of formation.
Statement of Purpose
The application must state the business activity or activities the LLC will pursue in Texas. The Secretary of State suggests the phrase “any lawful business or activity under the law of this state.” Using this phrase keeps the options flexible. If a business purpose is listed and the LLC changes its business purpose, an amendment may need to be filed to change the purpose.
The application must also contact a statement that the entity is authorized to pursue the same business or activity under the laws of the LLC’s state of formation. This statement is included on the application itself therefore the signature on the application certifies this statement. No separate statement is needed.
Beginning Date of Business
Provide the date the out of state LLC began or will begin to transact business in the state. If the entity transacted business in Texas for more than 90 days before the application is submitted, a late filing fee will be assessed.
Principal Office Address
Provide the street or mailing address of the principal office of the out of state entity. The principal office address can be a P.O. Box. It does not have to be a physical address.
Registered Agent
The out of state LLC must submit a registered agent name. The person designated as the registered agent must have consented in written or electronic form to serve as the registered agent. The consent does not need to be submitted with the application for registration. The registered agent for the out of state LLC can be either of the following:
- Texas entity registered to do business in the state of Texas
- Another out of state or foreign entity that is registered to do business in the state of Texas
- An individual resident of the state of Texas
The out of state LLC cannot act as its own registered agent.
Registered Office
Unlike the principal office address, the registered office address must be a street address where service of process may be personally served during normal business hours. The registered office address may not be a mailbox or telephone answering service.
Appointment of Secretary of State & Texas Secretary of State Form 401
The signature on the application is consent to allow the Secretary of State to act as an agent if the provided registered agent is not available to be served paperwork. The out of state entity could end up not being able to defend itself if the registered agent is not available. It is important to select a dependable registered agent and to update registered agent information. File Texas Secretary of State Form 401 if the registered agent or registered office needs to be changed to keep your records updated. Failure to maintain a registered agent and registered office may result in the revocation of the out of state entity’s registration.
Governing Persons
The name and address of each person serving as part of the governing authority of the out of state LLC. This is usually the group of persons who are entitled to manage and direct the affairs of the out of state LLC. A minimum of one person is required. Do not use prefixes. Suffixes are allowed for lineage (e.g., Jr., Sr.) but not for professional titles (e.g., M.D., Ph.D.)
The governing person can be a name or organization but not both. An address is required for each governing person. If privacy concerns are an issue, a P.O. Box is permitted for the governing person.
Effectiveness of Filing & Texas Secretary of State Form 805
The application for registration becomes effective when filed by the Texas Secretary of State. The effective date may be delayed to a date no more than 90 days from the date the application is signed. The effective date of the application may be delayed by the occurrence of a future event or fact other than the passage of time which must be stated on the application. Within 90 days of the filing of the certificate, file Texas Secretary State Form 805 Statement of Event or Fact in order for the certificate to take effect.
Signature & Payment
The application does not need to be notarized but an authorized person must sign the application. This person is generally a governing person or managerial official.
The filing fee is $750 and can be paid by personal checks, money orders, and credit cards. Credit cards are subject to a 2.7% convenience fee. The application can be filed online or mailed to the Secretary of State.
💡 Corporate Compliance: Looking Down the Road
Registering your foreign LLC with Form 304 is just step one. Texas has very strict annual filing requirements and missing a deadline can result in the state involuntarily dissolving your right to do business in the state. As a licensed CPA in the state of Texas, I have extensive knowledge of the regulatory compliance the state of Texas imposes on foreign LLC’s.
To understand how to protect your active status, or to see how the state handles corporate closures and cleanup down the line, explore the comprehensive guide on Texas Business Reinstatements and Entity Terminations.
Ready to Work With a Texas CPA to Register Your Business in Texas Without the Stress?