Step-by-Step Guide: How to Transfer Your Out-of-State LLC to Texas

Transferring your out-of-state LLC to Texas can seem like a complex task, but with the right approach, it can be a seamless transition that opens up new opportunities for your business. Texas is known for its business-friendly environment, favorable tax policies, and no personal or corporate income taxes, which make it an attractive destination for entrepreneurs. This guide will walk you through the process of moving your LLC to Texas, including the legal steps, tax considerations, and practical aspects you need to know.

Why Move Your LLC to Texas?

Before diving into the logistics, let’s briefly touch on why Texas is an appealing place to move your LLC. Texas offers several advantages for business owners:

• No state income tax: Texas is one of the few states that doesn’t impose a personal or corporate income tax, which can result in significant savings.
• Business-friendly regulations: Texas consistently ranks as one of the top states for business due to its favorable regulatory environment.
• Access to a large market: With a population of over 29 million, Texas provides a diverse and growing market for your products or services.

However, while Texas offers many benefits, transferring your LLC involves legal procedures that require careful attention. Below are the common methods for transferring your LLC to Texas and the steps involved in each process.Method 1: Form a New LLC in Texas and Dissolve the Out-of-State LLCOne straightforward way to transfer your LLC to Texas is by forming a new LLC in the state and dissolving your existing one. This method gives your business a “fresh start,” but it also involves several important steps:

‍Step 1: Create a New LLC in TexasTo start, you will need to file a Certificate of Formation with the Texas Secretary of State. This is the official document that establishes your LLC in Texas. Along with the formation documents, you must also choose a registered agent in Texas to receive legal correspondence on behalf of your LLC.

‍Step 2: Transfer Assets and LiabilitiesOnce your new LLC is formed, you’ll need to transfer all assets, intellectual property, and contracts from the old LLC to the new one. This step may involve updating leases, vendor contracts, bank accounts, and other business agreements.

‍Step 3: Dissolve the Out-of-State LLCAfter everything has been moved to Texas, you will need to dissolve your old LLC in the original state. This generally requires filing a Certificate of Dissolution or similar paperwork with the Secretary of State in the original state. You’ll also need to ensure that all taxes and liabilities have been settled.

‍Considerations:

• Tax implications: Moving your LLC to Texas may have tax consequences, particularly if the dissolution of the old LLC involves asset transfers. It’s essential to consult with a tax professional to ensure you understand the full impact.
• State-specific fees: The cost to file a new LLC in Texas is around $300. Additionally, dissolving an LLC in your home state may involve additional fees.

Method 2: Register Your LLC as a Foreign Entity in Texas

‍If you want to maintain the original LLC and simply expand operations into Texas, you can register your out-of-state LLC as a foreign entity. This option allows you to keep your LLC intact while doing business in Texas.

‍Step 1: Register with the Texas Secretary of StateTo register your LLC as a foreign entity, you will need to file Form 304 with the Texas Secretary of State. The form requires basic information about your LLC, including its name, address, and jurisdiction of formation. You will also need to provide proof that your LLC is in good standing in its home state.

‍Step 2: Obtain a Registered Agent in TexasAs a foreign LLC, you must have a registered agent located in Texas to receive official documents on behalf of your business. This can be an individual or a professional service provider.

‍Step 3: Pay the Filing FeesThe filing fee for registering as a foreign LLC is $750. Once your application is approved, you will be authorized to conduct business in Texas under your current LLC name, provided it meets Texas naming requirements.

‍Considerations:

• Name Availability: Your LLC must have a name that complies with Texas naming rules. For example, your LLC’s name must contain the words “Limited Liability Company” or “LLC.”
• Ongoing Compliance: You’ll be required to file annual reports and pay the Texas franchise tax, which is based on your revenue.

Method 3: Domesticate Your LLC in Texas

‍Some states, including Texas, allow for domestication, or the process of changing the jurisdiction of your LLC from one state to another. This means your LLC will remain the same entity, but it will now be governed by Texas law instead of the laws of the original state.

‍Step 1: Draft a Plan of Conversion

‍To domesticate your LLC, you must first create a Plan of Conversion that outlines the details of the process, including the LLC’s name, its status, and the state of origin. This document needs to comply with the Texas Business Organizations Code.

‍Step 2: File the Certificate of Conversion

‍Once the plan is in place, you must file a Certificate of Conversion with the Texas Secretary of State. This document verifies that your LLC is changing its jurisdiction to Texas. You’ll also need to file a Certificate of Formation to create the Texas-based LLC.

‍Step 3: Comply with State Requirements

‍During the domestication process, you may need to address any tax or legal obligations from your original state. This includes submitting proof that all taxes have been paid and that the business is in good standing.

‍Considerations:

• Eligibility: Not all states allow for LLC domestication, so you’ll need to verify that both your home state and Texas permit this process.
• Cost: The filing fee for the Certificate of Conversion and the Certificate of Formation is $300 each, making the total cost for domestication $600.

Tax Implications of Moving Your LLC to Texas

‍Transferring your LLC to Texas can have significant tax consequences. Here are a few key points to consider:

• Texas Franchise Tax: All LLCs operating in Texas are subject to an annual franchise tax. The tax rate depends on your business’s revenue, with small businesses paying a minimal fee.
• New EIN: If you are forming a new LLC or domesticating an LLC, you may need to apply for a new Employer Identification Number (EIN) from the IRS. This is required because the IRS treats the new entity as a separate business.
• Sales Tax: Depending on the nature of your business, you may need to apply for a sales tax permit with the Texas Comptroller of Public Accounts. This allows you to collect sales tax from customers in Texas.

It’s crucial to consult with a tax professional to ensure that you meet all of Texas’ tax requirements and that you understand the full financial impact of your decision.

‍Additional Considerations for Moving Your LLC to Texas

‍While the legal and tax steps are critical, don’t forget about the operational aspects of moving your LLC:

• Updating Contracts: Review and update all contracts with vendors, clients, and employees to reflect the change in jurisdiction.
• Licenses and Permits: Depending on your business type, you may need to apply for new licenses or permits in Texas or transfer existing ones.
• Notifying Banks and Financial Institutions: Inform your bank, lenders, and financial partners about the move. This is crucial to avoid any issues with account management and financing.

How Commenda Can Help with Your LLC Transfer to Texas Transferring your LLC to Texas can be a complex process, involving legal paperwork, tax considerations, and operational adjustments. Thankfully, the Commenda platform is here to simplify the process, providing end-to-end support for your business relocation. Whether you’re forming a new LLC, registering as a foreign entity, or domestically converting your existing business structure, Commenda can streamline key steps in the process. Here’s how our platform can assist:

• Seamless LLC Formation: Commenda offers a straightforward way to form your LLC in Texas. From filing the Certificate of Formation to securing a registered agent, we make the legal steps easy and efficient.
• Compliance & Tax Support: Our platform helps you understand Texas-specific tax regulations, ensuring you’re compliant with all state requirements, including sales tax, franchise taxes, and EIN registration. We even assist with applying for permits and licenses relevant to your industry.
• Simplified Document Management: Moving your LLC involves plenty of paperwork. Commenda stores and organizes essential documents, from your Certificate of Formation to any dissolution paperwork needed for your original state.
• Expert Guidance: While Commenda provides powerful tools for managing your LLC, we also offer access to professional guidance on tax and legal matters. Should you need to consult with an expert, our platform connects you with Texas-based professionals to navigate any complexities.

With Commenda, you can confidently move your business to Texas, knowing that our platform supports you every step of the way, making the process more efficient and reducing the risk of costly mistakes. Let us take the hassle out of your LLC transfer and focus on what matters most: growing your business in Texas!