Owe no Texas franchise tax? Why your LLC still has a report due every May

Usually yes, even when the tax is zero

In most cases, yes. According to the Texas Comptroller, the no tax due threshold for 2026 reports is $2.65 million, and an entity at or below it owes no franchise tax and no longer files a No Tax Due Report, but it must still file a Public Information Report or an Ownership Information Report. Those reports are due on the annual franchise tax due date, May 15. Skipping them can cost the business its right to transact business in Texas.

At Malnory, McNeal & Company, we prepare business returns and help owners set up new entities, and this is one of the Texas filings that most often slips through the cracks for small companies. The federal return gets attention every spring because it involves money; the franchise tax report does not, so it gets forgotten. This guide explains who is in the system and what to file. It is general information, so confirm your own situation with a licensed CPA and the Comptroller's current guidance.

Is your business in the franchise tax system at all?

The Comptroller describes the franchise tax as a privilege tax imposed on each taxable entity formed or organized in Texas or doing business in Texas. The key point for small businesses is that Texas looks at how the entity is legally formed, not how it is taxed federally. The Comptroller's guidance says that the legal formation of an entity, not its federal income tax treatment, determines filing responsibility.

That has practical consequences. A sole proprietorship that is not legally organized to limit the owner's liability is not a taxable entity, according to the Comptroller. A single-member LLC filing as a sole proprietor for federal income tax purposes is a taxable entity. So the owner who formed an LLC for liability protection, and whose federal return looks just like a sole proprietor's, still has Texas franchise tax reports to file. The Comptroller also says a joint venture wholly and directly owned by natural persons is not a taxable entity.

• Corporations and LLCs organized in Texas: in the system.
• Out-of-state entities doing business in Texas: generally in the system.
• Sole proprietorships without liability protection: not taxable entities.
• Single-member LLCs, even when disregarded for federal tax: taxable entities.
• Passive entities, exempt entities and certain new veteran-owned businesses: special rules apply, so check before assuming.

The no-tax-due threshold and what changed

The Comptroller lists a no tax due threshold of $2,650,000 for the 2026 and 2027 report years. An entity whose annualized total revenue is at or below that amount owes no franchise tax. For many years, those entities filed a short No Tax Due Report. That has changed: the Comptroller states that the No Tax Due Report is not available for 2026 reports, and entities at or below the threshold do not have to file it.

What they still have to file is the information report. This is the part many owners miss when they hear that the no tax due form went away. The tax may be zero and the tax report may be gone, but the annual Public Information Report or Ownership Information Report remains, and it carries the same May due date.

A typical example: a consultant forms an LLC, works from home, earns well under the threshold and files a federal return that looks exactly like a sole proprietor's. Nothing about that return prompts a Texas filing, and no tax is owed. But the LLC still owes its Public Information Report every May, and if the address on file is an old apartment, the reminders and forfeiture notices go there. The first sign of trouble may be a bank or a client discovering that the company is not in good standing.

PIR or OIR: which report is yours

The Comptroller divides entities into two groups. The Public Information Report, Form 05-102, is filed by corporations, limited liability companies, limited partnerships, professional associations and financial institutions that are organized in Texas or have nexus in Texas. It lists the entity's officers and directors. The Ownership Information Report, Form 05-167, is filed by other taxable entities and identifies the entity's owners; the Comptroller says it keeps ownership information confidential and does not post it online.

Both reports are due on the annual franchise tax report due date, even if the entity owes no franchise tax. The Comptroller lists exceptions: entities without Texas organization or nexus, exempt entities, qualifying new veteran-owned businesses during their first five years, and passive entities do not file them. In a combined group, each member organized in Texas or with nexus in Texas files its own report.

• Most small Texas LLCs and corporations: Public Information Report.
• Other taxable entities: Ownership Information Report.
• Due date: May 15, or the next business day if it falls on a weekend or holiday.
• Keep the officer, director and address information current, since notices go to the address on file.

What skipping the report can cost

This is where a missed form becomes a real problem. According to the Comptroller, an entity that fails to file can lose its right to transact business in Texas. Forfeiture can bar it from suing or defending itself in Texas courts, and officers, directors, partners, members or owners can become personally liable for certain debts of the entity. For an owner who formed an LLC precisely to separate business and personal liability, that is the opposite of what they wanted.

The Comptroller sends notices before forfeiture, including a Notice of Intent to Forfeit Right to Transact Business. To resolve it, an entity at or below the threshold files the missing Public Information Report or Ownership Information Report. Entities that owe tax have more to clear: the Comptroller lists a $50 penalty for each report filed after the due date, a 5% penalty on tax paid 1 to 30 days late, a 10% penalty on tax paid more than 30 days late, and interest on past-due tax beginning 61 days after the due date.

Above the threshold: how the tax is figured

Once a business grows past the threshold, the franchise tax becomes a real number, and planning matters. For the 2026 and 2027 report years, the Comptroller lists a rate of 0.375% for retail or wholesale entities and 0.75% for other entities. There is also an EZ Computation option for entities with total revenue up to $20 million, at a rate of 0.331%. The tax is calculated on a margin computed under Texas rules, which differ from federal taxable income, so the federal return is a starting point, not the answer.

The choice between computation methods and the treatment of related entities can change the result. A growing Dallas company approaching the threshold should look at this a year ahead, the same way it plans federal taxes. If you are also weighing an S corporation election, remember that it changes federal taxation but not the Texas filing; whether an LLC should elect S corporation status covers the federal side.

Mistakes I see with Texas entities

Most franchise tax problems for small businesses are not about calculation. They are about assumptions and addresses. These are the patterns that come up most often, and each one is easy to prevent once you know to look for it.

• Assuming a single-member LLC has no Texas filing because the federal return looks like a sole proprietor's.
• Hearing that the No Tax Due Report was eliminated and concluding nothing is due.
• Letting the mailing address on file go stale, so forfeiture notices never reach the owner.
• Forming several entities for different properties or ventures and tracking filings for only one.
• Forgetting that a company formed in another state but doing business in Texas may have Texas obligations.
• Treating the franchise tax as separate from the bookkeeping, so revenue figures on the report do not match the books.

Putting it on the calendar

The simplest fix is to treat May 15 as a fixed date in the business calendar, alongside federal deadlines and payroll filings. Assign one person to confirm the right report was filed for every entity you own, and keep a copy of each filing with the year's tax records. If you own several entities, a one-page list with each entity's name, Texas taxpayer number, report type and filing confirmation is worth its weight.

It also helps to have your accountant handle it as part of the annual tax work. When the same firm keeps the books and prepares the federal return, the revenue figure used for Texas comes from the same numbers, and the filing does not depend on someone remembering. If you are comparing what that kind of ongoing help costs, what a CPA firm charges for bookkeeping, payroll and taxes explains the factors.

Getting it squared away

If you are not sure your entities are current, start by checking each one's status with the Comptroller, then gather any notices you have received. We can review which report each entity owes, file what is missing and build the filings into your annual tax work. Our Dallas office works with owners across the Dallas–Fort Worth area, and our Paris, Texas office serves Northeast Texas.

If you are choosing a firm for this and the rest of your tax work, checking a Texas CPA firm's license and peer review explains what to verify first. The goal is simple: every entity in good standing, every report filed on time, and no surprise letters about a form nobody knew existed.

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