Companies Moving to Texas: Straightforward Conversion

Executive Summary

Texas continues to attract companies relocating or expanding operations because of its business-friendly environment and favorable tax structure. Businesses evaluating a move should understand the legal and operational requirements involved in entity conversion, registration, and compliance. BoyarMiller serves as outside general counsel for companies establishing or expanding operations in Texas, helping businesses navigate the legal requirements and long-term growth planning.

Texas’ Business Friendly Environment

Texas continues to grow, and is predicted to be the most populous state by 2045.[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.

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]  Texas has also created a new business-specific court system that aims to streamline the dispute resolution process, saving resources for businesses when disputes arise. It is no wonder that several small business owners are following the tides of their larger counterparts and moving to Texas.

For businesses evaluating relocation opportunities, understanding Texas’ legal requirements involved in entity conversion and registration is an important part of protecting ongoing operations and minimizing disruption during the transition process. Many companies also work with a corporate attorney in Texas to coordinate entity filings, governance updates, and operational compliance matters associated with establishing a Texas presence.

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, many states including 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. However, 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.

 Businesses researching outside general counsel Texas business setup strategies should note that entity conversion is often only one part of a larger legal transition process that may also include employment, tax, licensing, contract, and governance considerations.

Using a conversion to change 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.

 So How Do I Get My Texas Boots?

 Although this appears to be a simple process, 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 as well as a review of the impact of a conversion on the business’ ongoing operations from a legal perspective. 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.

 BoyarMiller serves as outside general counsel for companies establishing or expanding operations in Texas, advising businesses on entity formation, conversion strategy, governance, commercial contracts, and operational risk management. Companies seeking guidance on a Texas relocation can benefit from proactive legal planning designed to support long-term growth and compliance in Texas.

 This Insight was originally published in July 2022 has been updated with recent sources and the latest information.

Frequently Asked Questions

What legal steps are required when a company moves to Texas?

When a company moves to Texas, the legal process typically includes evaluating the appropriate entity structure, preparing a Plan of Conversion, filing conversion documents in both the original state and Texas, and registering the entity with the Texas Secretary of State. Depending on the structure of the business, additional legal requirements for companies moving to Texas may include updating governing documents, reviewing commercial agreements, evaluating tax implications, and ensuring ongoing compliance with Texas laws and regulatory obligations. Many businesses work with an outside general counsel Texas business setup team to coordinate these legal and operational requirements as part of a broader relocation strategy.

About The Author

Jet A. McGuire, Senior Associate, Corporate M&A Group

 Jet McGuire represents corporate clients and entrepreneurs in various business matters including mergers & acquisitions, corporate formation and governance, conversions, restructuring, contract negotiations, real estate transactions, complex aviation transactions and leasing arrangements, and general business matters.

 [1] https://www.newsweek.com/texas-become-biggest-state-2045-center-gravity-shifts-south-2031011/

 [2] https://comptroller.texas.gov/

 [3] https://www.forbes.com/sites/greatspeculations/2022/05/26/texas-is-now-home-to-more-fortune-500-companies-than-any-other-state-and-im-not-surprised/?sh=671002d127d5

 [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.