Every taxable entity formed in Texas or that does business in Texas is required to pay a franchise tax. The franchise tax is considered a privilege tax, which means that you pay the tax for the privilege of having your business operate in Texas. You are required to file a franchise tax report, whether or not you are required to pay the tax, as long as you are a business that operates in Texas. It is, therefore, necessary to check your franchise tax account status to determine whether or not your right to go on with business activities in this area is active.
Multiple account statuses exist at different times for various businesses. Your franchise tax account status needs to be active for you to have the right to carry out business operations in Texas, but you can have a different status other than that one at a particular time. One of the statuses that you can have is that of an active franchise tax account that is eligible for termination or withdrawal. This one indicates that your company has met the requirements of the franchise tax to file for termination or withdrawal with the state secretary. Another status that you can have is a forfeited franchise tax account status, meaning that your right to transact business here is forfeited. You can have a ‘not established’ status, indicating that your company’s franchise tax responsibilities ended because you do not complete a franchise tax questionnaire that you are required to complete. ‘Franchise tax ended’ is another possible status, which means that your franchise tax responsibilities came to an end because the company has ceased to exist where it was created or is no longer doing business in Texas. You could also have a ‘franchise tax involuntarily ended’ status, meaning that your company’s registration was ended because of tax for future or an administrative forfeiture by the secretary of state in Texas.
You may be wondering which entities are subject to the franchise tax. These include limited liability companies, corporations, banks, professional associations, joint ventures, partnerships, trusts, professional corporations, loan and savings associations, and other legal entities. Some are not subject to this tax, but they have various exceptions that you would need to look up to be sure that you are not required to pay the taxes. These include sole proprietorship businesses, unincorporated political committees, general partnerships owned by natural persons, tax-exempt entities, etc. It is crucial to get details and information that applies to your particular business so that you will comply with the law and not assume that your entity is exempt without knowing what is required of you. You can find a site that gives you all the information that you need to know concerning franchise tax in Texas. You will get to learn what is required of you, and even how the taxes are computed and filed so that you know the process to follow when getting compliant.