Moving Your Business to Texas: Steps to Relocate or Expand

Texas’s booming economy and business-friendly policies have attracted many companies to relocate or expand operations here. If you’re considering moving your existing business to the Lone Star State, you’re in good company – Texas has been ranked the “Best State for Business” by CEOs for over two decades. Here’s how to bring your business to Texas and what to keep in mind:

1. Foreign Qualification vs. Domestication: First, decide whether you will expand your current company into Texas or relocate it entirely:

• Foreign Qualification: If you want to keep your original entity in its home state but also operate in Texas, you can register as a foreign entity in Texas. This means filing an Application for Registration (also known as a Foreign Qualification) with the Texas Secretary of State. Your company retains its original state of incorporation but gains legal authority to do business in Texas (you’ll have to maintain compliance in both states).
• Domestication (Conversion): If you intend to move the legal home of the business to Texas and possibly cease operations in the prior state, Texas allows a procedure called conversion (a form of domestication) for certain entities. Through conversion, your existing company can change its state of formation to Texas. This typically involves filing a Certificate of Conversion and a Certificate of Formation in Texas and obtaining necessary approvals in your original state. The result is your business becomes a Texas entity and is no longer governed by the laws of the previous state.

2. Foreign Registration (Expansion) Process:

• Obtain a Certificate of Good Standing (or existence) from your current state.
• File the appropriate Application for Registration: Form 304 for an ordinary LLC, Form 301 for a for-profit corporation, or Form 302 for a nonprofit corporation with the Texas Secretary of State, providing information about your company (its legal name, state and date of formation, principal office, Texas registered agent, purpose, etc.). If your name is not available in Texas, you may need a fictitious name (DBA) for Texas.
• Pay the filing fee ($750 for corporations, $750 for LLCs as of now) and await Texas’s filing confirmation.
• Once registered, your company must abide by Texas laws for transactions here (like needing a Texas registered agent, and filing Texas franchise tax reports annually). You will also keep filing annual reports/taxes in your original state.
• Tip: If Texas will become a major place of business, you might also relocate key licenses, permits, or even employee base here gradually.

3. Domestication (Conversion) Process:

• Confirm that the transaction is permitted for your legal entity under both states’ current laws and your governing documents.
• Draft a Plan of Conversion (basically a document approved by the owners or board that says the company will convert into a Texas entity).
• File a Certificate of Conversion with Texas, along with a Certificate of Formation for the new Texas entity. These filings formally create your company under Texas law.
• Identify the specific origin-state conversion filings and coordinate their effective dates. Conversion, withdrawal, cancellation, and dissolution are different actions; do not substitute one for another without reviewing the consequences.
• After conversion, your “new” Texas company is considered the same legal entity that existed before, just in a new jurisdiction. Review the statutory treatment of assets and liabilities and any contract, license, lender, or bank consent and notice requirements. Remaining business activity and registrations can create continuing obligations in the original state. Final taxes and reports may also be required.
• Notify the IRS of the address change (the EIN generally stays the same if the entity is the same, but confirm with a CPA if any tax classification changes are needed).

Conversion costs: For a Delaware LLC to Texas LLC, the standard filing fees are $600 in Texas ($300 conversion plus $300 formation) and $220 in Delaware: $820 before service fees, taxes, and optional extras. Delaware annual LLC tax is currently $400, with the actual outstanding balance reviewed before filing. Other legal entity types differ. See the official sources and request an itemized quote.

4. Practical Considerations of Relocating:

• Taxes: Remember that Texas has no personal income tax and no corporate income tax, which is a big draw. However, your business will be subject to the Texas franchise tax if it’s above the revenue threshold. Ensure you register for a Texas Comptroller taxpayer number and file franchise tax reports.
• Licenses and Permits: If your business is in a regulated field (construction, healthcare, finance, etc.), check Texas state agency requirements. You may need new Texas licenses or to transfer existing ones. Similarly, local permits (occupancy permits, etc.) will be needed for any Texas locations.
• Employees: If you’re moving employees, Texas generally offers a lower cost of living than many other large states, which can be a perk. You’ll need to set up Texas workforce accounts (unemployment tax, etc.) and consider differences in labor laws (Texas is an at-will employment and right-to-work state, with generally fewer regulations on things like overtime than some states).
• Banking and Professional Services: Open a Texas business bank account if you’ll primarily operate here. You may also want to engage a Texas-based attorney or accountant who knows local law.
• Local Support: Tap into Texas’s extensive business resources. Cities like Austin, Dallas, Houston, and San Antonio have chambers of commerce and economic development organizations eager to help relocating businesses. There may even be incentives if you’re bringing significant jobs or investment (for instance, city-level grants or the Texas Enterprise Fund for major projects).

5. Celebrate the Texas Advantage: Businesses often cite Texas’s friendly business climate as a key reason for relocating. Benefits include a central location with major transportation hubs, a large and diverse talent pool (thanks to major universities and a growing population), and communities that champion entrepreneurship. Texas’s pride in being pro-business means you’ll often find a welcoming environment with plenty of networking opportunities and support for new arrivals.

Moving a business can be complex, but with Texas’s attractive benefits, it can be well worth it. Whether you simply register your existing company here or fully transform it into a Texas entity, ensure you follow the legal steps to remain compliant and protect your company’s continuity.

If you need guidance during the relocation process – from filing the right paperwork to understanding Texas’s requirements – we’re here to help make your transition smooth. Request an itemized conversion quote with TexasRelocate, and soon you too can proudly do business in the Lone Star State!