Beware of the Dangers of Late Filing a Texas Franchise Report

Is your business operating in the state of Texas? If so, you may be required to file an annual Texas Franchise Report and pay the Texas Franchise Tax. This tax is based on your business’s net income, and the Texas Franchise Report is the document you use to report this information.

Who Is Required to Submit a Texas Franchise Report?

In Texas, all taxable entities established within or doing business in the state must file a Texas Franchise Report and pay the taxes due. This requirement applies to most types of business entities, including corporations, limited liability companies (LLCs), partnerships, and other legal entities. Some exemptions to the franchise tax requirement exist, but they are not automatically granted. A complete list of entities subject to and exempt from the franchise tax can be found on the Texas Comptroller’s website. Furthermore, all taxable entities that file a Texas Franchise Tax Report are required to file a Public Information Report with the Texas Comptroller’s Office.
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Failing to file these reports and pay required taxes can result in significant consequences for your business, including penalties, interest, and even the revocation of your business’s right to operate in the state. It is crucial to be aware of the consequences associated with late filing and take steps to ensure that all reports are filed and taxes are paid on time.

What Are the Consequences of Late Filing a Texas Franchise Report?

Late filing of a Texas Franchise Report and Public Information Report can have serious consequences for businesses in the state. The Texas Comptroller of Public Accounts requires all business entities to file an annual report with its office by May 15th of each year. If the report is filed late, a $50 late penalty will be charged. Additionally, interest will begin to accrue on the unpaid taxes.

If an entity does not file the required reports and pay the necessary fees within 45 days of the due date, it risks forfeiting its powers, rights, and right to transact business in Texas. During that period of forfeiture, corporate members become personally liable for each debt the entity incurs. Additionally, the entity’s name is not protected during this time, which means there is a risk of another entity registering under the same name. 

The law allows three years to reinstate the corporate entity. Reinstatement requires paying late fees, obtaining a tax clearance letter from the Texas Comptroller’s Office, and submitting it to the Texas Secretary of State. However, reinstatement cannot occur if someone else has already registered under the entity’s name.

Protect Your Business With Legal Representation for Texas Franchise Tax

Given the serious consequences associated with late filing the Texas Franchise Report, it is imperative for businesses in Texas to have a skilled attorney by their side who can help ensure that their reports are filed on time and that all necessary fees are paid. An experienced attorney will provide guidance through the filing process, ensuring compliance with all requirements and deadlines. They can help gather the necessary financial information, prepare and submit accurate reports, and handle any communications or disputes with the Texas Comptroller's Office. ​