Thursday, May 19, 2011

Foreign Entities Transacting Business in Texas

Foreign entities transacting business in Texas must register with the Texas Secretary of State's office.  For purposes of the Texas Business Organizations Code (TBOC), a "foreign" entity is any entity formed under the laws of another jurisdiction, such as a Delaware limited liability company or a Nevada corporation.

But what does it mean to "transact business" in Texas?  Unfortunately, the TBOC does not define that term.  Section 9.251 of the TBOC offers some assistance by providing the following non-exclusive list of activities which do NOT, by themselves, constitute transacting business in Texas:

(1)  maintaining or defending an action or suit or an administrative or arbitration proceeding, or effecting the settlement of: (A)  such an action, suit, or proceeding; or (B)  a claim or dispute to which the entity is a party;
(2)  holding a meeting of the entity's managerial officials, owners, or members or carrying on another activity concerning the entity's internal affairs;
(3)  maintaining a bank account;
(4)  maintaining an office or agency for: (A)  transferring, exchanging, or registering securities the entity issues; or (B)  appointing or maintaining a trustee or depositary related to the entity's securities;
(5)  voting the interest of an entity the foreign entity has acquired;
(6)  effecting a sale through an independent contractor;
(7)  creating, as borrower or lender, or acquiring indebtedness or a mortgage or other security interest in real or personal property;
(8)  securing or collecting a debt due the entity or enforcing a right in property that secures a debt due the entity;
(9)  transacting business in interstate commerce;
(10)  conducting an isolated transaction that: (A)  is completed within a period of 30 days; and (B)  is not in the course of a number of repeated, similar transactions;
(11)  in a case that does not involve an activity that would constitute the transaction of business in this state if the activity were one of a foreign entity acting in its own right: (A) exercising a power of executor or administrator of the estate of a nonresident decedent under ancillary letters issued by a court of this state; or (B) exercising a power of a trustee under the will of a nonresident decedent, or under a trust created by one or more nonresidents of this state, or by one or more foreign entities;
(12)  regarding a debt secured by a mortgage or lien on real or personal property in this state: (A) acquiring the debt in a transaction outside this state or in interstate commerce; (B) collecting or adjusting a principal or interest payment on the debt; (C) enforcing or adjusting a right or property securing the debt; (D) taking an action necessary to preserve and protect the interest of the mortgagee in the security; or (E) engaging in any combination of transactions described by this subdivision;
(13)  investing in or acquiring, in a transaction outside of this state, a royalty or other nonoperating mineral interest;
(14)  executing a division order, contract of sale, or other instrument incidental to ownership of a nonoperating mineral interest; or
(15)  owning, without more, real or personal property in this state.

The Texas Secretary of State's website provides further information on this topic here:

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