Most people, when they see or hear of the Texas Franchise Tax think to themselves “I’m a small business owner, and I don’t own any franchises…I don’t own a McDonalds or a Burger King….so the Franchise Tax doesn’t apply to me.” Wrong.
The Texas Franchise Tax actually applies to Partnerships, Corporations, LLCs, professional and business associations, joint ventures, and business trusts, as per the Texas Comptroller’s Website. In other words, if you own a small business and you’ve set it up the smart way to protect your assets, (as an LLC or corporation), then you’re probably subject to the Texas Franchise Tax.
Before you freak out, here’s the good news: the Texas Franchise Tax is only due if your business has more than $1,080,00.00 in revenue in 2015. It’s called the No Tax Due Threshold.
But don’t stop reading because you’re making under a million a year (sadly) and think the Texas Franchise Tax doesn’t affect you…think again. You may not owe any tax to the State of Texas, but you are still required to file a Franchise Tax Report. Basically, you have to tell the State of Texas that you don’t owe it any franchise tax. It takes approximately two minutes to fill out and submit on the Texas Comptroller’s page (once your business has a profile set up). However, failure to file the Report will incur a $50 late fee…which only gets bigger and bigger the longer you go without filing the Report. Many people forget this until they get an annoying letter from the Texas Comptroller’s office saying they owe $50 in late fees for not filing the Franchise Report.
So, even if you don’t own a “Franchise” and even if you make under a million dollars a year, save yourself some money and file your Texas Franchise Tax Report.