When and Why Do I Need to Register My Company to Transact Business in Hoston, Texas?

7/31/2019 When and Why Do I Need to Register My Company to Transact Business in Hoston, Texas?

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When and Why Do I Need to Register My Companyto Transact Business in Houston, Texas?
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When and Why Do I Need to Register My Company to Transact Businessin Texas?

If you have a company that is incorporated in a state other than Texas (it is

called a foreign corporation) , it can still transact business in Texas legallyif you follow the rules. There is a requirement that it first register to dobusiness in Texas.

If a foreign corporation transacts business in Texas without first obtaining

a certificate of authority, the penalties are severe, as discussed later inthis article. In addition to other penalties, there can be a forfeitureimposed in the amount of $100 to $5000 for each month or portion of amonth that the foreign corporation operated unlawfully in Texas.
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What a foreign corporation must do before transacting business in Texasis obtain a certificate of authority from the Texas Secretary of State thatauthorizes it to transact business in Texas. The law is very clear, and it isfound in Article 8.01 of the Texas Business Corporation Act :

No foreign corporation shall have the right to transact business inthis State until it shall have procured a certificate of authority so to do

from the Secretary of State.


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Now there are certain activities that are not considered to betransacting business in Texas because the statute specifically excludesthem.

The statutory list of activities that are allowed to be done in Texas withoutregistering is as follows:

The statutory list is not necessarily exclusive, so it is sometimes alsonecessary to look at case law to see how courts have treated other kindsof activities.


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Maintaining or defending any action or suit or any administrative orarbitration proceedings, or effecting the settlement thereof or thesettlement of claims or disputes to which it is a party;

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Holding meetings of its directors or shareholders or carrying on otheractivities concerning its internal affairs;

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Maintaining bank accounts;3


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Maintaining offices or agencies for the transfer, exchange, andregistration of securities issued by it, or appointing and maintainingtrustees or depositaries with relation to its securities;

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5 Voting the stock of any corporation which it has lawfully acquired;

6 Effecting sales through independent contractors;


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Creating as borrower or lender, or acquiring, indebtedness ormortgages or other security interests in real or personal property;

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Transacting any business in interstate commerce;8

Conducting an isolated transaction completed within a period of thirty(30) days and not in the course of a number of repeated transactionsof like nature;

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Exercising the powers of executor or administrator of the estate of anon-resident decedent under ancillary letters issued by a court of thisstate, or exercising the powers of a trustee under the will of a non-resident decedent, or under trust created by one or more non-residents of this state, or by one or more foreign corporations, if theexercise of such powers, in any such case, will not involve activitieswhich would be deemed to constitute the transacting of business inthis state in the case of a foreign corporation acting in its own right;

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Acquiring, in transactions outside Texas, or in interstate commerce, of debts secured by mortgages or liens on real or personal property inTexas, collecting or adjusting of principal and interest paymentsthereon, enforcing or adjusting any rights and property securing saiddebts, taking any actions necessary to preserve and protect theinterest of the mortgagee in said security, or any combination of suchtransactions;

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Investing in or acquiring, in transactions outside of Texas, royaltiesand other non-operating mineral interests, and the execution of division orders, contracts of sale and other instruments incidental tothe ownership of such non-operating mineral interests.

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If a foreign corporation properly registers to do business in Texas, thenit will receive a certificate of authority to do business in this State.

There are many benefits that are derived from that certificate of

authority, yet a foreign corporation that properly registers to do businessin Texas is not totally subject the corporate laws in Texas , as is made clearin Article 8.02 of the Texas Business Corporation Act :

Texas



Until that certificate of authority has been revoked or withdrawn, theforeign corporation will enjoy the same, but no greater, rights andprivileges as a domestic corporation organized for the purposes set forth inthe application pursuant to which such certificate of authority is issued;

and, as to all matters affecting the transaction of intrastate business in thisState, it and its officers and directors shall be subject to the same duties,restrictions, penalties, and liabilities now or hereafter imposed upon adomestic corporation of like character and its officers and directors;

provided, however, that only the laws of the jurisdiction of incorporation of a foreign corporation shall govern

The internal affairs of the foreign corporation, including but not limitedto the rights, powers, and duties of its board of directors andshareholders and matters relating to its shares, andThe liability, if any, of shareholders of the foreign corporation for thedebts, liabilities, and obligations of the foreign corporation for whichthey are not otherwise liable by statute or agreement.

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But what are the penalties for transacting business in Texas as a foreigncorporation without a certificate of authority? They are substantial, asset forth in Article 8.18 of the Texas Business Corporation Act :



No foreign corporation which is transacting, or has transacted,business in this State without a certificate of authority shall bepermitted to maintain any action, suit, or proceeding in any court of this State (whether brought directly by the corporation or in the formof a derivative action by a shareholder) on any cause of action arisingout of the transaction of business in this State, until such corporationshall have obtained a certificate of authority.

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Nor shall any action, suit, or proceeding on any such cause of action be

maintained in any court of this State by any successor, assignee, or legalrepresentative of such foreign corporation, until a certificate of authorityshall have been obtained by such corporation or by a foreign corporationwhich has acquired all or substantially all of its assets.

It is expressly provided, however, that the provisions of this article shallnot affect the rights of any assignee of the foreign corporation as theholder in due course of a negotiable promissory note, check, or bill of exchange, or as the bona fide purchaser for value of a warehouse receipt,stock certificate, or other instrument made negotiable by law.



The failure of a foreign corporation to obtain a certificate of authorityto transact business in this State shall not impair the validity of anycontract or act of such corporation, and shall not prevent suchcorporation from defending any action, suit or proceeding in any courtin this State.

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A foreign corporation which transacts business in this State without acertificate of authority shall be liable to this State, for the years orparts thereof during which it transacted business in this State withouta certificate of authority, in an amount equal to all fees and franchisetaxes which would have been imposed by law upon such corporationhad it duly applied for and received a certificate of authority totransact business in this State as required by law and thereafter filedall reports required by law, plus all penalties imposed by law for failure

to pay such fees and franchise taxes.

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In addition to the penalties and payments thus prescribed, suchcorporation shall forfeit to this State an amount not less than OneHundred Dollars ($100) nor more than Five Thousand Dollars ($5,000)for each month or fraction thereof it shall have transacted business inthis State without a certificate . The Attorney General shall bring suit torecover all amounts due this State under the provisions of thissection.

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So what will it cost me to do it right, you say? That is a good questionto ask when you consider the penalties for not obtaining a certificateof authority to transact business in Texas.

The current filing fee to obtain a certificate of authority to transactbusiness in Texas is Seven Hundred Fifty Dollars ($750) . That is not aninsignificant amount of money, but it is nothing when compared to thepossible penalties for not complying with the law.

Texas


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510 Bering Drive, Suite 300Houston, Texas 77057

Fax to 713.358.5513

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Main Office

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When and Why Do I Need to Register My Company to Transact Business in Hoston, Texas?

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