LLC 10 min read Updated: August 2026

Texas franchise tax: what it is, who files, and when (the 2026 LLC guide)

Q: Do I owe franchise tax in my LLC’s first year?

You must file the report from your first fiscal year, though you’ll almost never owe tax that soon: most new LLCs sit far below the $2.65 million annualized revenue threshold. But “I owe nothing” is not “I don’t file” — the report is mandatory even when the tax comes out to $0.

Despite the name, franchise tax has nothing to do with franchises. It’s a state tax most Texas LLCs must report every year — even when they owe nothing.

If you formed a Texas LLC, sooner or later you’ll hear the term “franchise tax.” Confusing name aside, it’s not about restaurant chains: it’s a state tax on your LLC’s revenue, and nearly every LLC registered in Texas must file the Franchise Tax Report annually — even when nothing is owed.

This guide covers exactly what it is, who files, what it costs under the 2026 threshold, the key dates, and what happens if you miss them.

What exactly is the franchise tax?

It’s a tax the State of Texas charges business entities operating inside its borders: LLCs, corporations and partnerships. In practice it’s Texas’s “privilege tax” — you pay for the privilege of doing business formally in the state.

It’s administered by the Texas Comptroller of Public Accounts, the same agency behind sales tax. Texas has no personal income tax, but it does tax business entities through this annual filing.

Who has to file?

Practically every entity registered with the Texas Secretary of State files, whether it made money, lost money, or did nothing:

LLCs — single-member and multi-member, registered in Texas.
Corporations — S-Corps and C-Corps alike.
Limited partnerships (LPs) and other state-registered entities.

The common exceptions are sole proprietorships (businesses run under a personal name, with no registered entity) and some specifically exempt nonprofits. If your business is a registered LLC, corporation or partnership — this applies to you.

What does it cost?

The 2026 no-tax-due threshold

Every two years the Comptroller adjusts the revenue threshold below which no franchise tax is owed. For the 2026 report, the threshold is $2.65 million in annualized total revenue.

At or below $2.65 million, you owe no franchise tax. One important change: since 2024 the Comptroller eliminated the separate “No Tax Due Report” — it no longer exists as its own form. Below the threshold you pay nothing, but you still file your Public Information Report or Ownership Information Report every year. Filing remains mandatory; only the form changed.

Above the threshold

Past $2.65 million annualized, the rate depends on your industry:

Method / industry	Rate	Applies when…
Retail and wholesale	0.375%	Your LLC sells at retail or wholesale
Other industries	0.75%	Any other line of business
E-Z Computation	0.331%	Annualized revenue of $20 million or less, on total revenue (simplified, no deductions)

These are the Comptroller’s current rates — always verify the current year’s figures at comptroller.texas.gov, since the threshold adjusts for inflation every two years.

Deadlines and how to file

The annual deadline is May 15, for the report covering the prior fiscal year. Unlike the IRS’s federal April 15, this one lands a month later — one of the details that trips up LLC owners most.

Create or log in to your account on the Comptroller’s Webfile system.
File the report that fits your situation: the EZ Computation Report for total revenue of $20 million or less (the simple one), or the Long Form Report above that.
File your Public Information Report (or Ownership Information Report) along with it, owed tax or not.
Submit electronically through Webfile, or by mail where your case allows.

The Public Information Report (PIR)

Alongside the tax report you file the Public Information Report — or the Ownership Information Report for non-publicly-traded entities. It lists your LLC’s officers, directors or members. Unlike your other business paperwork, the PIR is public: anyone can look it up with the state. All the more reason to keep your Registered Agent and ownership information current every year.

What happens if I don’t file?

The consequences are staged, and they stack fast:

A $50 penalty per report filed after the deadline, owed tax or not.
A 5% penalty on tax due when payment lands 1–30 days late — rising to 10% past 30 days.
Past 45 days unfiled, the Comptroller can declare your LLC’s forfeiture — you lose your Good Standing with the state.
Without Good Standing: you can’t sue, you can’t register new contracts, and officers or members can become personally liable for the business’s debts.
To reinstate: file every overdue report, pay the accumulated penalties and any tax owed, and request reinstatement.

Common mistakes

Believing “I owe nothing” means “I don’t have to file.”
Filing the tax report but forgetting the Public Information Report.
Mixing up the deadline: it’s May 15, not the IRS’s April 15.
Not updating your Registered Agent’s address with the state.
Reporting the wrong annualized revenue because the books aren’t current.

How to make it painless

With bookkeeping up to date, filing takes half an hour: your annualized revenue is already computed and it’s a matter of the right form. Without it, you can lose days reconstructing a year of numbers.

Our monthly bookkeeping keeps your numbers ready for franchise tax every May, and we coordinate your federal tax preparation in the same engagement. LLC not formed yet? We open it with compliance right from day one.

Frequently asked

Franchise tax questions, answered

Do I owe franchise tax in my LLC’s first year?

You must file the report from your first fiscal year, though you’ll almost never owe tax that soon: most new LLCs sit far below the $2.65 million annualized revenue threshold. But “I owe nothing” is not “I don’t file” — the report is mandatory even when the tax comes out to $0.

My LLC had zero revenue. Do I still file?

Yes. Even with no activity or income, you file your Public Information Report (or Ownership Information Report) with the Comptroller every May 15. Skipping it because “it doesn’t apply” is one of the most common mistakes — and the one that walks the most LLCs into forfeiture without the owner noticing.

Is franchise tax the same as sales tax?

No. Franchise tax is an annual tax on the privilege of operating your business in Texas, computed on your year’s total revenue. Sales tax is what you collect from customers on each taxable sale and report monthly or quarterly. Different filings, same Comptroller, different rules and dates. See our Texas sales tax guide →

Can I file it myself?

Yes — the Comptroller’s Webfile system is built for LLC owners to file their own reports. The challenge is almost never the platform; it’s having your annualized revenue computed correctly, especially past your first year. With your bookkeeping current, filing yourself takes under an hour.

What if my LLC is already in forfeiture?

You can reinstate it. You file every overdue report — including the years you owed nothing — pay the accumulated penalties and any tax owed, and request reinstatement with the Comptroller and the Secretary of State. Penalties keep stacking the longer it sits, so catching up sooner costs less.

Can I just close my LLC to avoid franchise tax?

Dissolving your LLC does end the filing obligation going forward, but you must first file a final report and be current on everything overdue — you can’t simply stop operating and assume the state closes it for you. If you’re done with the LLC, a formal dissolution beats leaving it in forfeiture, because forfeiture keeps generating personal liability for the officers.