Tax Law and Business Organization Strategy

Entities Need Maintenance, Too

Just as you may find yourself without a car by ignoring regular maintenance, you may find yourself without liability protection and expected business and tax advantages if you ignore your entity’s maintenance. If you have an ownership or management interest in an entity, it may be time to perform an Entity Maintenance Checkup. 

Consider the following items if you have an interest in a Texas entity:

  • Registered agent and registered office address must be kept current with the Secretary of State. All entities in Texas must have a physical address for service of process or receipt of official state notices. Failure to keep this current can cause the entity to be involuntarily terminated. 
  • Registered limited liability partnerships (LLPs) and limited liability limited partnerships (LLLPs) must re-register with the Secretary of State each year. Professional associations (PAs) must file a yearly report of members. Liability protection can disappear if the registration lapses.
  • Limited Partnership (LP) periodic reports must be filed with the Secretary of State approximately every four to five years. Notices are sent to the registered office of the LP.  By failing to take step 1 above, some entities don’t receive their notice about the periodic report, and unexpectedly find that their LP status was terminated by the Secretary of State, leaving them with no more liability protection than a general partnership.
  • Public Information Reports are filed in the Texas Comptroller’s office with the yearly franchise tax returns. Any changes to officers, directors, or managers should be noted on these reports, and signed by an officer or director of the corporation or limited liability company (LLC). Information contained on this form, as well as all filings made with the Texas Secretary of State’s office, are publicly available online.
  • Assumed names, also known as fictitious names or doing business as names, expire after 10 years and must be re-filed with the Secretary of State and with the county clerk in the county where the principal office is located. Sole proprietorships and general partnerships file these certificates only on the county level. 
  • Corporate books or entity record books should be current, including written minutes of annual meetings for corporations and LLCs. Keeping the entity records in order helps matters go smoother when borrowing money, buying and selling property, or undergoing entity restructuring. It also helps protect again  a “piercing of the corporate veil,” by showing that the entity’s records are kept separate and distinct from your personal records. 
  • If your entity is doing business in another state, depending on the type of business it is conducting, you may need to register to do business in that state. Also, if you are no longer doing business in a certain state, you may wish to withdraw that registration in order to avoid compliance issues there.

Depending on the type of entity, there may be more compliance issues to be considered. A periodic Entity Maintenance Checkup can help keep your entity in good running condition.

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