Foreign LLC Qualification

An LLC is considered "domestic" to the state in which it was formed¹ and "foreign" to all other states. In Texas, a "foreign LLC" is the term used to describe an LLC formed in another state. We sometimes refer to a foreign LLC as an out-of-state LLC.

¹Whether an entity is domestic or foreign depends on where the entity was formed and what law governs its internal affairs NOT on the location of the headquarters or one of its offices.

A foreign LLC (an LLC formed in another state) must file an Application for Registration of a Foreign LLC with the Texas secretary of state if the entity is “transacting business” in Texas. Unfortunately, our statutes do not define “transacting business,” but the Business Organizations Code lists activities that are not considered transacting business.

Failure to register an out-of-state LLC in Texas (if required) can result in the following penalties:

• Inability to maintain a lawsuit in a Texas court until registration;
• Injunction from transacting business in Texas;
• Civil penalty equal to all fees and taxes that would have been imposed if the entity had registered when first required; and
• Late filing fees* owed to the secretary of state by an entity registering more than 90 days after first transacting business in Texas.

*Late filing fees are determined by multiplying the number of whole or partial calendar years that have passed since the date the entity initially transacted business in Texas times the $750 registration fee. 

Yes, the state will reject the filing if the name of the out-of-state LLC is the same as or similar to the name of any existing entity in the Texas database.

You can call the state's name availability hotline (512-463-5555) to get a preliminary determination on whether they will reject the filing.

If the state rejects the Application for Registration of a Foreign LLC because the LLC name is not available in Texas, the LLC must register in Texas under a fictitious name by filing a DBA.