Texas does not have a personal income tax, but it does have a franchise tax on most entities doing business in the state. Most small businesses owe $0, and still have to file. Here is what that means in practice.

The Short Version

The franchise tax applies to LLCs, corporations (including S corporations), partnerships (mostly), and PLLCs. Sole proprietors and general partnerships made up of individuals are the main exceptions.

For 2026 reports, if your annualized total revenue is $2.47M or less, you owe $0. That covers the vast majority of Texas small businesses. But here is the part that trips people up: you still have to file something, even when you owe nothing.

What You Actually File

The Texas Comptroller breaks franchise filings into two pieces.

1. The Franchise Tax Report. If you are under the $2.47M no tax due threshold, you file either the No Tax Due Report or the EZ Computation Report. If you are over, you file the Long Form.

2. The Public Information Report (PIR) or Ownership Information Report (OIR). This is a separate form that lists your officers, directors, or members. LLCs and corporations file the PIR. Partnerships and other entities file the OIR. This is the form people most often forget, because it is easy to assume the no tax due filing covers everything. It does not.

The Deadline

Franchise tax reports are due May 15 each year. Extensions push the filing to November 15, but any tax owed is still due on May 15. For most small businesses that owe $0 this is academic, but if you are approaching the threshold it matters.

What Happens When You Miss It

The Comptroller is not quiet about missed filings. Skip a year and the state can forfeit your entity's right to do business in Texas. That means losing liability protection, losing the ability to sue in state court, and in some cases personal exposure for the owners on business obligations. Fixing a forfeiture is paperwork and fees, but it can be fixed.

The more common consequence is smaller and more annoying: late filing penalties of $50 plus interest, letters from the Comptroller, and the same dance every renewal period because you have a history of being late.

Mistakes to Avoid

  • Forgetting the PIR or OIR. The number one franchise tax mistake for small businesses.
  • Assuming an LLC taxed as an S corporation files differently. It does not. Franchise tax is based on the entity, not how the IRS taxes it.
  • Using the wrong revenue number. Total revenue for franchise tax is calculated from your federal return but includes a few Texas specific adjustments. When in doubt, have a CPA walk through it once.
  • Ignoring the May 15 letter. The Comptroller sends a reminder. Read it.

Where JEM CPA Can Help

Franchise tax is not the hardest filing a small business will do, but it is the one that quietly causes the most trouble when it is missed. JEM CPA handles franchise tax as part of a normal small business tax engagement, and on a standalone basis for businesses that only need that piece.