LLCs are business structures in the United States that provide limited liability for their owners. This business structure ensures that owners cannot be held personally liable for the company's debts or liabilities. When you look into the structure of an LLC, you will see that they are hybrid entities. They combine both the characteristics of a corporation, as well as the characteristics of a partnership or sole proprietorship.
Forming an LLC is a great option for many businesses, despite this, it does come with responsibilities, such as filing an annual report. In the state of Texas, there is no annual report. Instead, there is a Texas Franchise Tax. This is levied annually by the Texas Comptroller on all taxable entities that do business in Texas. It is calculated in a few different ways and paid on May 15 each year.
Each year an LLC is required to file the annual report and pay a filing fee. The annual report provides details regarding all of the company’s activities throughout the prior year. These reports provide information to the state regarding profits, as well as the manager’s and member’s roles in the business. You should include the names and addresses of directors or managing members, as well as the company and registered agent address.
Unlike most states, Texas does not require LLCs to file annual reports. Despite this, LLCs in the state of Texas are required to file annual franchise tax reports. In other states, the fees for filing an annual report range between $50 and $400. These are paid each year on a specific date but sometimes are paid every two years.
More than just LLCs are required to pay the franchise tax in the state of Texas. Instead, all businesses doing business in the state are required to. Including:
There are three main methods of filing an annual franchise tax report. The first is “no tax due”. If your business makes less than $1,110,000 in revenue, then you will not owe any franchise tax. If you are above that amount, you will need to fill out a different method, the “EZ Computation form”. The third method is the “long form”.
The Franchise Tax Report forms can be downloaded from the Comptroller. Then submit them to the following address:Texas Comptroller of Public Accounts
The Texas Franchise Tax is calculated based on a company’s margin, as long as you are making revenue above $1,110,000. Your total revenue is considered all revenue amounts reported for federal income tax, and then subtracting statutory exclusions.
Statutory exclusions include:
The franchise tax can be calculated by a few methods with gross revenue
If you need more time in order to file your Texas Franchise Tax Report, then you can submit an extension. Typically this will only be granted if you have already paid 90% of your tax owed by May 15.
Otherwise, if you do not file and pay your annual franchise tax report by May 15, there will be a $50 penalty for each report. Additionally, there will be a 5% penalty on franchise tax paid up to 30 days after May 15.