In recent years, many companies located in high-cost-of-living states have chosen to relocate their headquarters to Texas. Our state is considered by many companies, large and small, to have a business-friendly environment. If you have a limited liability company (LLC) and want to move your LLC to Texas, an experienced Houston business lawyer can help.
Turn to the Oracle Legal Group for your organization’s legal needs.
Steps to Move Your LLC to Texas
There are several different routes you can take to move your LLC to Texas. Each one has its advantages and disadvantages and involves unique steps. Before deciding how to best effectuate the move, you should have an understanding of how each approach works. That’s where a Houston business law attorney is best positioned to assist you.
These are the options you have for moving your out-of-state LLC to Texas:
- Register your company as a foreign entity. Generally, this step is only advised for either temporary moves or expansions, so tell your lawyer if either applies.
- Convert your out-of-state LLC into a Texas LLC. This is also known as domesticating the LLC.
- Form a new business entity in Texas. When you do so, you will need to dissolve the out-of-state entity.
Establish a Texas LLC, then merge the existing out-of-state business into it. Because this may be complex, it is strongly advised that an attorney handle it.
Which Approach Is Right for Your Business?
To decide how best to move your business, an attorney needs to thoroughly evaluate it. That means examining such factors as its needs, objectives, size, and other variables. No two LLCs are alike, so moving yours to Texas requires a customized strategy.
Each of the above-mentioned ways has its own benefits and drawbacks. For instance, domestication of your LLC allows it to continue without interruption to its business operations. At the same time, any obligations and liabilities that exist for your LLC outside of Texas will continue.
For some businesses, dissolving the LLC and forming a new one in Texas gives them a fresh start. However, the company will need to pay certain start-up costs all over again.
Tax Issues Your LLC Will Face in Texas
It’s also vital to keep in mind any potential tax implications when you move your LLC to Texas. Each approach above triggers unique tax consequences that you will have to consider. Our firm can guide you and help you learn the basics of tax issues related to relocating your out-of-state LLC to Texas.
LLC owners pay federal taxes on the income that is earned from their LLC. That’s because the IRS allows LLCs to take advantage of pass-through taxation. This means that income and expenses pass through the LLC and to the owner’s personal tax returns. LLC owners pay no state income tax in Texas.
Texas does, however, impose a franchise tax on each taxable entity that is formed or does business in the state. This franchise tax is directly based on your LLC’s profit margin. The franchise tax is calculated using one of the following methods:
- Multiplying total revenue by 70%.
- Deducting from the total revenue the cost of goods sold.
- Deducting compensation from total revenue.
- Total revenue minus $1 million.
- Texas’ EZ computation rate of 0.331%, available for businesses with less than $20 million in total revenue.
There are other taxes like sales that we can discuss with you. Our goal is to help you understand the costs and financial implications of the move.
Comprehensive Business Law Solutions You Can Rely On
If you’re moving to Texas, the Oracle Legal Group welcomes you. And we would be honored to help make the move as easy and seamless as possible. Before you decide on the approach you should take, speak with our dedicated business lawyers. Give us a call today or use our contact form to get started.
