Texas Dealer License Training

Register with Texas Secretary of State
Obtain Employer Identification Number
Licensing with Office of Consumer Credit Commissioner

How to register with the Texas Secretary of State. We're going to gain an employer identification number. I'm going to show you how to get licensed with the Office of Consumer Credit Commissioner if you're helping with financing. We'll talk about motor vehicle sales tax, your annual motor vehicle inventory declaration, your monthly vehicle inventory tax statement, prepaying inventory taxes that are due, your unit property tax factor, and vehicle appraisals by dealers.

Registering your dealership with the Texas Secretary of State and designating a registered agent. Many business entities operating in Texas must register with the Texas Secretary of State's office. Sole proprietors and general partnerships do not need to register with the Secretary of State. As a business owner in the state, you will also need to have what is known as a registered agent, and the following are the most common types of business entities in Texas.

A corporation, a Texas corporation, is created by filing a certificate of formation with the Texas Secretary of State. You can file your corporate documents by mail, or you can file your paperwork right through the SOSDirect system, which we're going to cover here in just a few moments. A corporation is made up of shareholders and directors.

Limited liability company or LLC. A Texas limited liability company is created by filing a certificate of formation with the Texas Secretary of State's office. Any person on an LLC is referred to as a member. An LLC may have one member or multiple members. If filing as an LLC, you will need to decide whether the LLC will be managed by a manager, referred to as a managermanaged LLC, or if the LLC will be managed by a member, which is referred to as a membermanaged LLC. An LLC has some reduced liabilities for members, but you should seek legal advice when deciding on how to structure your dealership's business entity. You can file your limited liability company documents by mail or right through SOSDirect system, which, like I said, I'm going to show you in just a moment.

Limited partnership or an LP. A Texas limited partnership is a partnership formed by two or more persons and having one or more general partners and one or more limited partners. This is more of a technical business entity, and you will need to have a written agreement to operate in accordance with the law. You may file your limited partnership by mail or through SOSDirect.

Limited liability partnership or LLP. In order to limit the liability of its general partners, a general or limited partnership may opt to register as a limited liability partnership, and you can file that paperwork by mail or through SOSDirect.

If you're opening your dealership as a sole proprietor or a general partnership, you will need to register your DBA, which stands for doing business as, or sometimes, we call it the assumed name certificate with the county where your dealership is located. A sole proprietor is a single person operating a business without formal business organization. A general partnership is a business organization when two or more persons start a business for profit. If the partnership is conducted under an assumed name, and that's a name other than the proper name of the individual, then an assumed name certificate would need to be filed in the office of the county clerk in the county where the dealership is maintained. An assumed name certificate should be filed in all counties where business is conducted under the assumed name, such as all supplemental dealership locations that may be in separate counties. Corporations, LLCs, LPs, and LLPs may file an assumed name as well.

You will need a new dealer license when you switch certain business registration categories, such as a sole proprietor can't change to a general partnership and vice versa, and a sole proprietor or general partnership can't change to another type of business without applying for a new dealer license.

The Secretary of State.

Upon determining the type of business entity for your dealership, the Secretary of State' office can assist you in the filing process or answering many of your questions. You may contact the Texas Secretary of State business and commercial section via email, and that's going to be at corpinfo@sos.texas.gov. Or you can call them directly at (512) 4635555. Neither the Automobile Dealer Training Association nor the Texas Secretary of State's office may advise you on what type of business entity to form. It's always best to consult with an attorney who can properly advise you.

Texas registered agent.

The Texas Business Organizations Code requires every domestic or foreign filing entity to maintain a registered agent and an office in the state of Texas. A domestic filing entity and a foreign filing entity registered to do business in Texas are required to continuously maintain a registered agent and a registered office address in Texas. An entity's registered office must be a physical address in Texas where the registered agent can be served with process during business hours. The registered office is also where the office of the Secretary of State would mail any correspondence. A registered office is the business office address of the registered agent and may be the same as the entity's place of business. It cannot, however, be a post office box that is part of a commercial mail or message service unless the commercial enterprise is actually itself a registered agent.

A registered agent must be an individual resident of Texas or an organization other than the organization to be represented that is registered to do business in Texas. For example, an LLC may not act as the LLC's registered agent, but an owner, officer, or partner of the LLC may act as the registered agent. The registered office address must be located at the street address where the service of process may be personally served on the entity's registered agent transactions during the normal business hours. And by the way, if you are acting as your own registered agent, you'll need to complete ... It's called Registered Agent 4401 and store that in your records. You may also use one of the many businesses in the state that act as registered agents. You can just go to your favorite search engine and type in Texas registered agent. You will find many companies that charge really nominal fees to serve as a registered agent.

You need to be aware that you must determine your registered agent before you file your business entity with the Secretary of State because your registered agent information must be submitted with your Secretary of State business filings. There are three ways to register your new business with the Secretary of State. You can file online with SOSDirect, which we're going to cover in just a moment. You can fax your documents to the Secretary of State. Or you can also mail your documents to the Secretary of State. I also want you to be aware that all owners and members of businesses that are required to file with the Texas Secretary of State must also be listed in the owner and management section of the dealer application, and the business status must remain active and in good standing with the Texas Secretary of State throughout the time that the dealer is licensed.

I want to show you what is quite possibly the easiest way to register your business with the Secretary of State, and that's going to be at SOSDirect. The Texas Secretary of State has a very businessfriendly website that makes it extremely easy to start a business in the state of Texas and file your appropriate paperwork. Here, you can see the business services page of the Secretary of State's website. This website is extremely helpful when you're starting your dealership or any new business. You can view business basics, helpful startup information. You can view business forms. You can use filing options and much, much more.

As stated a few moments ago, there are three different ways you can register your business name with the Secretary of State. And first, we're going to do this right here through the SOSDirect system. And I want you to be aware, normally, the filing fee is $750, no matter how you submit the documents to the state, whether you're faxing them or mailing them or completing your registration through SOSDirect, if you file online, or fax the document, and credit card payments are subject to a convenience fee of 2.7%. You may view most formation documents through the SOSDirect online filing system, and when you file documents online, you're going to have to provide your credit card information, or if you're paying with echeck, you need to make sure that you have enough funds in the account to pay for the filing. The system does not keep credit card information on file for security purposes, and according to their system, the newest system, you need to have Acrobat Reader 7.0 or newer and WinZip 7.0 or better or any other type of unzipping program.

I'm going to show you how to easily submit your documents to the Secretary of State through the SOSDirect system. But before I do, for this example, we're just going to show you how to do this when you're filing your business as an LLC. That's a limited liability company. I want you to be aware this is to be used as an example for demonstration purposes only. Always seek legal advice when deciding how to structure the business entity of your dealership. First, you're going to click on the SOSDirect logo at the top of the page just to the left of business services, and that's the SOS.texas.gov website that will be on here. And you're going to click on the enter site button. And I want you to be aware, you're going to be charged $1 to enter this system, so you will need to create an SOSDirect account.

Click on the request for SOSDirect account link that you see way down there at the very bottom left of the page. You're going to enter your business name or your first and last name, not both, just either your business name or your first and last name. Then you're going to click continue. And now you're going to enter your address, your phone number, email address, and you're going to create a new password and confirm the password. Be sure to store your passwords for future efforts. Then you're going to click continue. And now, you'll need to enter your credit card information. Your credit card is going to be charged a $1 processing fee just to get into SOSDirect, So you'll put your credit card information in there, and then you're going to click continue. You will now be emailed an SOSDirect user ID, and you must use the user ID that is emailed to you to log onto SOSDirect.

You're going to enter your SOSDirect user ID and password that you created just a few moments ago, and then you'll click submit. And now, you will reenter your contact information, then click continue. You will then be required to enter your credit card information a second time, and this time it's going to be used to pay for any official filings. Then you'll click continue. And now you click on business organizations at the top left of the screen to begin filing your required dealership documents with the Secretary of State.

Now you are officially logged in, and you may select from several choices on this screen. Okay? From the reservation "formation" registration documents menu, you will choose your business entity from the dropdown box. For this example, we will file as a domestic limited liability company, which is an LLC that is located in the state of Texas. And I want to remind you, this is only to be used as an example, so be sure to seek legal advice before deciding on your business entity. You'll select your business entity. Then click on the file document button. Now, you will enter your filing type.

You'll select certificate of formation, then click the continue button. You'll enter the name of your dealership, and click on the name availability search box. If you're filing as an LLC, LP, or LLP, then you must have the letters LLC, LP, or LLP in your business name. If that name is available, you will be able to click the continue box to reserve that name. Next, you have to enter your Texas registered agent information, so remember, you have to get your Texas registered agent information before you file any paperwork through the Texas Secretary of State. Enter your Texas registered agent information, then you'll click the continue box.

Now you will enter your owner information by clicking on the add manager member box there, and you'll need to enter either the business name, or like I said earlier, the first and last name there. And now you're going to select your management type in this particular screen right here. And now you'll enter any supplemental documents, such as maybe any organizational agreements here, if applicable. And then you'll click the continue box at the bottom there.

And now you're going to enter the organizer of the LLC if you're an LLC, and this will be the managing partner, or if you are the only person on the LLC, you will enter your name, then click the continue box. You will now enter your signature and the delayed starting date of the LLC or whatever corporation that you might be filing, which must be at least one day later than the day that you're filing. Your delayed date may not be the same date that you are filing through the system. It must be at at least one day later.

Click the continue box. Now you see an overview of the document that you're getting ready to submit to the Texas Secretary of State's office. Be sure to review this document carefully, as it is legally binding. Make sure all information is true and correct. When you're sure the document is true and correct, you will click on the submit filing button at the very top left of the page that you see there to submit your filing document to the Secretary of State's office. Your fee may be different than the fee that's shown, and fees are based on the type of business entity that you're filing.

If there's a problem with your documentation, a representative from the Secretary of State's office will contact you via email to help correct the mistake. If there are mistakes, you cannot amend your business filing. You would have to start all over from the beginning. However, if there is a mistake on your filing, your credit card will not be charged until that issue is resolved. If you submit your filing correctly, your credit card will be charged immediately. You will receive verification of your filing within 48 hours of your SOSDirect application, so your verification will normally contain three documents. You're going to receive your Secretary of State acknowledgement form, your Secretary of State certificate, and what's known as your Secretary of State original document. Be sure to store all copies in your files.

If you've not received an email verifying your filing within 48 hours, you should definitely contact the Secretary of State's business and commercial section. You can send them an email at corpinfo@sos.texas.gov, or you can call them directly at (512) 463-5555. If you ever close your dealership, you must terminate your business entity. Your documents will normally be processed within 24 hours, and the outcome of the processing, which is either evidence of filing or possibly a rejection letter, would be emailed to you, and the website will actually send you two emails to the email that's on the account, and the first is called the packing slip. And so just make sure that you check your spam or trash folder because sometimes emails will go there that are sent from the Secretary of State. The second email is the notice that your document was accepted or rejected.

If you ever cease the operation of your dealership, you must properly dissolve your business with the Texas Secretary of State, or you could face future tax liabilities. And once again, it is imperative that you seek legal advice when setting up the business entity classification for your dealership.

Employer identification number.

Before you apply for your Texas used motor vehicle dealer license, you may need to apply for an employer identification number, which we sometimes refer to as an EIN. This is the number that the Internal Revenue Service uses to identify your business for tax purposes. You can apply for your employer identification number for free at irs.gov, or you can give them a call and do it over the phone at (800) 8294933. When you obtain your employer identification number, you will need to record it in a safe place. You will be required to enter your employer identification number on most dealer license applications, so you want to make sure that you have your employer identification number before you apply for your dealer's license.

Sole proprietors without any employees may use their Social Security number and don't have to file for an employer identification number. If you are a sole proprietor with employees, you will need to have an employer identification number. I want to repeat that. If you are a sole proprietor with employees, you will need to have an employer identification number.

You can begin the process at www.irs.gov, and we're going to jump on here, and we're going to click on the begin application button. You're going to need to select your business entity. And once again, for this training scenario, we will be filing as a limited liability company or an LLC. This is for demonstration purposes only. Be sure to seek legal advice before deciding what type of business entity that you're going to be forming. You'll need to select how many members and then the state of Texas. For this example, we'll state that there's only one member on the LLC. Texas is a community property state, so you will need to select whether or not any members are husband or wife. And then you're going to be asked why you are filing, and normally, you will select started a new business. You'll need to enter the name and Social Security number and select whether or not you're one of the owners.

Then you'll enter the address and phone number and mail forwarding address if applicable. And finally, you're going to enter the legal name or the DBA, the county where the dealership is located, the state where the dealership is located, and obviously, that must be in Texas, and your home state. Select Texas if you live in Texas or your home state if you live in another state. Then select your start date.

Now you'll need to select how you would like to receive your employer identification number. For the quickest receipt, you should select the receive letter online box so you can obtain your employer identification number immediately. Choosing to receive your employer identification number by mail can take as long as four weeks, which would substantially delay your dealer application process. If you have any questions about your employer identification number, you can call the IRS directly. Once again, that's (800) 8294933. Be sure to record your employer identification number in a safe place, as it is required to obtain most dealer licenses, and it's also going to be used on your business tax returns every year.

Licensing with the Texas Office of Consumer Credit Commissioner.

Dealers that are involved with any type of financing ... Maybe you're going to be a buy here, pay here dealer, or maybe you're offering financing through a third party finance company. Then you must be licensed with the Office of Consumer Credit Commissioner. If you intend to provide inhouse or third party outofhouse financing, then you need to get a license with the Office of Consumer Credit Commissioner, and you can call them directly (512) 9367600. And their website, as you see on the screen there, is www.OCCC.texas.gov to obtain your required sales finance license.

I'm going to show you how to do this. You're going to jump on the website, and you're going to create a user name, password, create a security question, and then you'll always have to enter that code there once you log on, and that basically shows that you're not some type of internet robot stealing passwords. Once you click submit, you will receive an email, and you'll be able to log back on here, and you'll need to select whether your business entity is a sole proprietor, or if you are, say, for example, LLC, LLP, or a corporation, then you would also enter your employer identification number here. Also, if you ever receive any error messages, then you can call the Office of Consumer Credit Commissioner directly at (512) 9367600.

The request is going to be processed right through this application portal that you see here, and it must be approved by the Office of Consumer Credit Commissioner. Your request will be in the received status until it is approved, so you always want to allow at least three to four business days for that approval. When the request is approved, then you will receive an email, and the status will go from received to approved. Okay? Always keep that in mind. If you are going to be offering any type of inhouse financing, that could be buy here pay here, or maybe outofhouse financing, which could be like, say, for example, a third party finance company, you must obtain a license with the Texas Office of Consumer Credit Commissioner. Once again, that phone number is (512) 9367600. You can drop them an email at Licensing@OCCC.texas.gov. And once again, they're on the website that you see the website on your screen, www.OCCC.texas.gov.