Texas franchise tax for a foreign-owned LLC: the no-tax-due threshold and the report you still file

Texas has no personal income tax. What it does have is the franchise tax, a tax on the privilege of being a company formed or doing business in Texas. For most small LLCs owned from Europe it comes to zero dollars. The filing does not: every year, by May 15, your company tells the Comptroller who it is, and missing that report has consequences that hurt far more than the tax.

What the franchise tax is and who pays it

The franchise tax is imposed on each taxable entity formed in Texas or doing business in Texas. The Texas Tax Code lists who counts as a taxable entity, and the list includes the limited liability company, the corporation and most partnerships.

Two points matter for a European owner. First, a single-member LLC that the IRS disregards for federal income tax is still a taxable entity in Texas: the Comptroller looks at how the company is legally formed, not at how it is taxed federally. Second, a company formed in Texas is in the system because it was organized there, whether or not it has a single customer in the state.

The franchise tax is a state tax. It has nothing to do with your federal filings such as Form 5472, and the numbers are separate too: the federal side runs on your EIN, the Texas side on your 11-digit taxpayer number. Our guide to the Texas tax ID number explains both.

The numbers for 2026 and 2027

If your company's annualized total revenue is at or below the threshold, it owes no franchise tax. For most LLCs we form for clients in Europe, that is the normal case in the first years.

Below the threshold: no tax, but a report

Small companies used to file a No Tax Due Report. That form is gone: the Comptroller states that it is not available for 2026 reports. What remains is the information report, and it is mandatory even when no tax is due:

• A company formed as a corporation, LLC or limited partnership files the Public Information Report (Form 05-102).
• Other taxable entities file the Ownership Information Report (Form 05-167).

The report is due on May 15; if that falls on a weekend or holiday, the next business day. Your first report is due on May 15 of the year after your company became subject to the tax. The Comptroller's own example: a company that became subject to the tax during 2025 had its first annual report due on May 15, 2026. A Texas LLC formed in 2026 therefore files its first report by May 15, 2027.

Above the threshold: how Texas computes the margin

Once revenue passes the threshold, the tax is computed on the company's margin. Under the Tax Code the margin is the lowest of these amounts:

• 70 percent of total revenue;
• total revenue minus $1 million;
• total revenue minus cost of goods sold, or minus compensation, at the company's election.

The margin is then apportioned to Texas: it is multiplied by the company's gross receipts from business done in Texas divided by its gross receipts from its entire business. The rate applies only to that Texas share. A company that sells mostly outside Texas therefore pays on a small slice of its margin.

Companies with total revenue of no more than $20 million can choose the EZ computation instead: apportioned total revenue times 0.331 percent, with no other credits or deductions.

An illustration, not a forecast: a Texas LLC with $3 million of revenue, 10 percent of it from Texas customers, and no large cost of goods sold. The lowest margin is revenue minus $1 million, so $2 million; the Texas share is $200,000; at 0.75 percent the tax is $1,500. Under the EZ computation it would be $3 million times 10 percent times 0.331 percent, so $993. Which method is cheaper depends on your own figures, and that is a question for your annual filing, not for a rule of thumb.

Deadlines, extensions and penalties

• Extension. A company that requests an extension by May 15 and pays at least 90 percent of the tax it will report, or 100 percent of the tax reported for the previous year, gets until November 15. Companies required to pay by electronic funds transfer get until August 15 on the same conditions.
• Late report. Every required report filed after the due date costs a $50 penalty, even if no tax was due.
• Late tax. Tax paid late carries a penalty of 5 percent of the tax due, and another 5 percent after 30 days.
• Forfeiture. A company that does not file a completed and signed Public Information Report or Ownership Information Report may forfeit its right to transact business in Texas. It can then be denied the right to sue or defend itself in Texas courts, and its owners or officers may become personally liable for certain company debts.

The last point is the one that matters. The $50 is an annoyance; losing the limited liability you formed the LLC for is not.

What this means if you run the LLC from Europe

Put May 15 in your calendar for every year the company exists, revenue or not. Keep the Comptroller's letters coming to an address where someone reads them. And keep the Texas report apart in your head from the federal returns: they go to different agencies under different numbers, and doing one does not do the other. Our overview of an LLC's annual obligations lists both sides.

When we form your Texas LLC, the filings to Texas and the compliance calendar are part of the formation package in the first year and of the annual package from the second year on.