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July 12, 2022
From 2020-2021 more people – about 33% more – moved to Texas than any other state.[1] Why is Texas growing so fast? The reasons are obvious: Texas has no state income tax and one of the lowest costs of living in the country.[2] Now that many businesses and employees can operate remotely, they are choosing Texas – where they can earn more without asking for a raise.
Texas’ Business Friendly Environment
The reasons listed above may seem like enough to incentivize anyone to make the leap to the great state of Texas, however, for Texas businesses there is one more major incentive – the historically friendly business environment. Due to this environment, more deals are happening in Texas, more companies are moving their headquarters to Texas, and business is booming. In fact, Texas is now home to more Fortune 500 companies than any other state.[3] It is no wonder that several small business owners are following the tides of their larger counterparts and moving to Texas.
Can I Legally Move My Business to Texas?
If you are a business owner you probably have already thought about your company moving to Texas, but it is less likely that you have considered the legal ramifications of making the move. Fortunately, most states and Texas[4] permit the “conversion” of a business entity. Conversion is a legal term that has a broad meaning. It can mean a change in the form of an entity, i.e. converting a corporation into an LLC. It can also mean changing the state of organization of an entity, i.e. from a non-Texas LLC to a Texas LLC. For purposes of this article, the latter definition applies.
Using a conversion, changing the state of organization of your business entity is a straightforward process. First, you must tell your current state you are relocating. This is normally accomplished by filing a Certificate of Conversion with the Secretary of State of your entity’s state of formation.[5] Second, you must make a plan. This is called a Plan of Conversion.[6] It includes important information about where you are moving from, the type of business entity you operate, and that you will keep a copy of the Plan of Conversion on hand, in case it is requested.[7] Third, you must tell Texas that you are on your way, and you are bringing your business entity with you. This is accomplished in a two-fold process: (i) filing a Certificate of Conversion with the Secretary of State of Texas; and (ii) filing a Certificate of Formation with the Secretary of State of Texas.
Some states place specific restrictions on the types of entities which may be converted. For example, a California corporation cannot be converted to a Texas entity. Have no fear, the solution for companies moving to Texas from California is a simple migratory merger. To learn more about the steps to complete a migratory merger and the benefits of doing so, check out my article on the topic here.
So How Do I Get My Texas Boots?
Although this appears to be simple, it is important to note that the filings listed above are just what is required to be filed with each state. Every business entity is different and will require tailored internal documents to affect a conversion. This is where quality business legal counseling can help make your move stress free (at least for your company). Let us guide you through your company moving to Texas, the great state we call home. So, pick up some boots, jeans, and a cowboy hat, and, most importantly, don’t forget to bring your company when y’all move to Texas.
*Updated July 21, 2022:
Just In: Effective July 1, 2022 – July 30, 2023, the California Secretary of State is waiving certain filing fees. Out of state Corporations, LLCs, and Limited Partnerships desiring to do business in California will be able to register in California for free during this time period.
Other benefits include waived filing fees for formations of new California Corporations, LLCs, and Limited Partnerships.
Acting now can save you money after converting into or merging with your new Texas entity. You can now register to do business in California for free!”
[1] https://www.census.gov/newsroom/press-releases/2021/2021-population-estimates.html
[2] https://comptroller.texas.gov/
[4] TBOC 10.102
[5] Please note, individual state filing requirements vary vastly from state to state. Any particular state may require further or different filings to be made.
[6] TBOC 10.103
[7] Id.