Changing State of Incorporation

Changing State of Incorporation

When companies do business in Texas, they are required to register with the state government. This means filling out the correct paperwork, paying business taxes, etc. Of course, companies do not have to be incorporated in Texas to do business here.

Not all businesses choose to incorporate in the home/original state. In fact, more than 50% of publicly traded companies in the United States are incorporated in Delaware. Other states, such as Nevada, also frequently attract out-of-state corporations.

Are there benefits to re-incorporating your Texas business in Delaware, Nevada, or another U.S. state? There can be. If you are considering re-incorporating your company in another state, you should consult with a top-rated Texas business formation attorney who has the skills and experience needed to help you assess the pros and cons in your individual situation.

The Potential Benefits of Incorporating in Another State

For small companies that only do business in Texas or do relatively little business outside of the state, it probably does not make sense to re-incorporate in another jurisdiction. Doing so would just add compliance costs and additional complexity while offering little to no actual benefits to you or your company.

However, for mid-sized and larger companies, changing the state of incorporation can offer real advantages. For example, one of the reasons so many companies choose to incorporate in Delaware is the state has a well-developed body of corporate law. Delaware’s Court of Chancery hears corporate law cases and the court’s extensive case law makes legal issues there far more predictable. This is a huge benefit for mid-sized and large companies that are seeking to attract investment from venture capitalists or other outside firms.

The Process: ‘Reincorporation’ Could Mean Many Different Things

While you will hear the legal term ‘reincorporation’ used, it does not actually refer to a specific action. There is not a single step that Texas companies use to reincorporate into another jurisdiction. Depending on the specific nature of the company, there are several different methods that can be used to execute the reincorporation. Some of the most common examples include:

  • Conversion: Through a conversion, companies can become a new entity in another state. With Delaware in particular, there is a conversion law that can make this relatively easy to do. Though, there are certainly still complexities that can arise. Business owners and operators should always consult with a corporate law attorney before attempting a conversion.
  • Reverse Merger: With a reverse merger, a new company is created in another state and then it is merged with the original business.
  • Transfer of Assets: Through an asset transfer, a new entity is created in another state, and that new company acquires all of the assets of the original company. The original company survives, however, but now has the majority ownership of the acquiring company.

If your company is considering reincorporating in Texas or outside of Texas, you should speak to a business law attorney who can help you handle the process.

Contact Our Dallas Business Law Attorneys Today

At Bennett, Weston, LaJone & Turner, P.C., our Texas business formation lawyers are standing by, ready to assist you and your company. To find out if re-incorporating in Texas or another jurisdiction is the best choice for your business, please call us today at (214) 691-1776 or (888) 991-1776 to set up a confidential consultation.

2020-12-01T22:02:09-06:00November 9th, 2018|Business Law, Business Formation|
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