If you’ve decided to move your business to the booming economy of Texas, prepare your corporation for success. There is so much to consider if you’re planning a business move to Texas such as selecting which region of the Lone Star State you’ll land in or making sure your moving company is licensed in the state. In addition to all of those details, there are some important legal and financial matters to take care of if you own an LLC. Here are some things to know about transferring an LLC to Texas:
Choose the right path: There are different options for operating your LLC in Texas. Depending on your type of business, there are a few ways to move forward when transferring your LLC. Here are some of the options that may apply to your LLC:
- Register as a foreign entity. This is usually for a temporary move or an expansion. This doesn’t apply to just international businesses; any organization that is formed outside of the jurisdiction of Texas is referred to as a “foreign entity.”
- Convert or “domesticate” to a Texas LLC. A conversion allows your LLC to continue doing business. Domesticating an LLC might not be available in all states, but it allows you to keep your tax ID number or your Employee Identification Number (EIN). To register this way, you’ll need to get a certificate of good standing from your old state, then file paperwork and articles of domestication in Texas.
- Create a new entity. If you form a new entity, you will need to go through the process to dissolve your out-of-state entity.
- Set up a Texas LLC. Once you set up a Texas LLC, you’ll have to merge your out-of-state business into this new LLC.
What state are you in? Rules for LLCs can vary from state to state. Your Secretary of State’s office will be a valuable resource for helping you to determine the correct procedure for your LLC. The Texas Business Organization Code (BOC) requires LLCs to file an application for registration with the Texas Secretary of State. From the name of your LLC to its registration details, The Texas Secretary of State’s website has plenty of FAQs and information about doing business in Texas.
Consider costs: Of course, there will be moving costs and rent or real estate expenses for your business move. For the transfer of your LLC, be sure to think about registration or conversion fees, permits, licenses, and other costs for your LLC to move to Texas. Budgets and banking are a few more necessary things to take care of for this kind of transfer.
Figure out taxes: It will be necessary to determine any tax responsibilities that your business will have once it has been registered in Texas. LLCs are recognized by the IRS as partnerships or sole proprietorships. LLC owners pay federal income taxes on income derived from the LLC, but they do not pay state income tax. For LLCs, there is a franchise tax based on your company’s profit margin. Texas does impose a sales tax, so it will be necessary to collect and pay sales tax on any goods or services sold to Texas customers.
Get insured: If your LLC has employees, you will have to pay for state unemployment insurance as well as any other federal requirements. Tax rates can vary, and they are set annually by the Texas Workforce Commission.
Update your documents: Plenty of paperwork is involved when there’s a transfer like this. There are contracts to operating agreements, employment agreements, permits, and licenses. You will need to be sure that all of your business documents reflect Texas laws when converting your LLC from out-of-state.
Partner with the right professionals: Business law attorneys and tax professionals can be helpful to have on your team when it comes to transferring your LLC. Choosing a team that is knowledgeable about local regulations and laws is essential.
While you’re in the process of getting professionals to help, consider reaching out to the Texas Economic Development Connection. This team of certified economic developers works with government agencies, chambers of commerce, and economic development organizations all over Texas in order to support small and large businesses that are relocating to Texas. These experienced consultants can help identify opportunities and can connect business owners with the right people who can help them set up their companies in Texas. Learn more about the Texas Economic Development Connection at: https://texasedconnection.com/.