Texas Franchise Tax: every LLC files by May 15, even with no tax due

Texas has no income tax, neither on individuals nor on wages. What it does levy is a tax on companies' gross revenue, with generous deductions and a high threshold.

For the 2026 and 2027 report years, that threshold is $2,650,000. Below it, no tax is due.

For comparison: for 2024 and 2025 it was $2,470,000. It is raised regularly, which in practice means the vast majority of small and mid-sized businesses in Texas never pay any franchise tax.

Here's the trap. If you stay below the threshold, you pay nothing, but you must still file a report: either the Public Information Report or, depending on the entity type, an Ownership Report.

This report is not a tax return. It names the people responsible for the company, meaning managers, directors or members, and it keeps the state's records up to date.

If you don't file it, you lose the right to do business in Texas. The company still exists, but it can no longer enforce its rights in court and cannot get a Certificate of Good Standing, which banks and business partners regularly ask to see.

It's called the Franchise Tax, and the name is misleading. It has nothing to do with franchising. It's an old term for a levy charged for the privilege of operating as a company in the state at all.

The tax base is not profit but gross revenue after deductions. That sounds unusual to European ears, because it means even a loss-making business can end up owing the tax if its revenue is high enough.

With a threshold of $2,650,000, this is theoretical for most of our clients. For growing trading businesses with high revenue and thin margins, it's very real, and then it pays to look at the different calculation methods Texas law offers.

Every LLC, corporation or limited partnership formed in Texas. And every company formed elsewhere that does business in Texas, whether or not it had to register there: for the Franchise Tax, $500,000 of revenue from Texas business in the fiscal year is enough, even without an office or staff in the state.

That second part regularly catches Delaware founders off guard. If you registered your company in Delaware because a video said so, and then rent a warehouse in Dallas, you're doing business in Texas. You have to register there, pay fees there, appoint a Registered Agent there and file this report there.

One company turns into two registrations with twice the paperwork. That's the price of choosing a state for the wrong reason.

The question of when a company is doing business in Texas decides everything else, and it is frustratingly vague.

Clear on one side: if you have an office, a warehouse, a workshop or staff in Texas, you're doing business there. The same goes if you store goods there and ship from there.

Clear on the other side: if you ship from Europe to Texas customers without any presence there, you are generally not doing business in Texas.

In between lies a gray zone that many European online sellers drift into without noticing: goods held in a marketplace operator's fulfillment center in Texas create nexus under most interpretations. If you sell through a large platform and use its warehouse network, you may have nexus in ten states at once without ever signing a contract about it.

For sellers, this is the most important practical question, more important than the choice of state. Start with Nexus laws and sales tax.

January 1: valuation date for property tax and exemptions.

Before May 1: homestead exemption for owner-occupied homes, and the deadline to protest your appraisal.

May 15: Franchise Tax Report and Public Information Report.

Monthly or quarterly: sales tax returns, depending on volume.

January 31 of the following year: property tax payment.

Five dates. Put them in your calendar and you have Texas under control. Miss them and you pay penalties for something that would have taken twenty minutes.

It's not just the taxes. It's the speed.

In Texas, a company is registered in a day. You move into commercial property in weeks, not quarters. A building permit takes months, not years. And the labor market is deep enough that you can actually find skilled workers.

On top of that, the authorities don't treat entrepreneurs as suspects. That's hard to put a number on, and it's the point newcomers mention most often when you ask them after a year.

The price is property taxes, summers of 40 degrees Celsius and infrastructure that lags behind the growth. If you know that and come anyway, you're coming for the right reasons. More in Texas as a US base and Is Austin the best city in the USA?

If you want to set up your Texas company or have its filings handled, talk to Mount Bonnell Advisors in Austin.

First comes a notice, sent to the address on record. If you don't keep that address current, you won't receive it.

Then the company loses its right to do business in Texas. In practice that means no Certificate of Good Standing, trouble with banks and business partners, and no way to enforce your own claims in Texas courts.

And if the lapse goes on, the company can be forfeited and struck from the records, with all the consequences for limited liability. That protection was the reason you formed the company in the first place.

It can be fixed, at the cost of back payments plus fees. A calendar entry would have prevented it.

A practical tip for anyone considering a move to Texas who has never been here: come for a trial visit in August, not April.

Between June and September there are weeks above 40 degrees Celsius, not as an exception but as the normal weather. Life moves indoors into air-conditioned spaces, and the midsummer electricity bill is what surprises newcomers most.

Come in April and you'll fall in love with bluebonnets, mild evenings and open windows. Come in August and you'll know what you're signing up for. Both are part of this state, but only one is a basis for a decision.

And a second tip: on that trip, set aside an afternoon for a meeting at a bank and one with a real estate agent, even if you have no concrete plans yet. Both conversations will tell you more about everyday life here than any brochure.

It isn't which state has the lowest taxes. It's this: where does my business actually create value?

The American system ties obligations to activity, not registration. If you work in Texas, Texas taxes you, no matter which state your company is registered in. Registering elsewhere saves you nothing; it just doubles the paperwork.

So the right order is always: first decide where you'll operate, then form your company there. Only depart from that rule for a concrete reason, such as investors who require Delaware.

Ask yourself this before you form your company and you'll save four-figure sums over the years, plus a lot of administrative hassle. The decision guide is in Which state, which entity type.

This state is business-friendly, and that is not a marketing line but something you can verify. It asks for little, and what it asks for, it expects on time.

It asks for no proof of share capital. It asks for no notary. It asks for no published financial statements. It asks for no license for most lines of business.

It asks for a report on May 15, a sales tax return if you make taxable sales, and property tax if you own property. And it expects you to handle all of this yourself.

For entrepreneurs from Europe, that is a change, and usually a welcome one. You trade a system that prescribes a lot and reminds you a lot for one that prescribes little and never reminds you at all.

If you formed your Texas company this year, May 15 may not apply to you yet. The first reporting obligation only arises in the year after formation.

This regularly leads to a misunderstanding: founders think there is nothing to do, then miss the first real deadline because they have never been through it.

So put it in your calendar now, for next year, with a reminder in April. It is the only Texas deadline a company without real estate and without taxable sales has at all.

Even so, the balance is clear. No state income tax, a levy that does not apply below $2.65 million in revenue, fast registration, a deep labor market and permit processes that take weeks rather than months.

On the other side: property taxes you will notice, and a sales tax obligation you have to take seriously. If you sell physical goods or provide certain services, you must register, collect, report and remit, each on its own schedule.

For the details, see Forming a company in Texas and Sales tax in the USA.

Update: What happens next is covered in Texas wants to scrap the double tax on platform fees, and anyone selling online should follow the coming weeks closely.

Consultation & implementation

If you'd like to find out what this means for your own situation, the best step is to book a consultation.