Picture a Bishop Arts boutique owner who sells lovely candles, files her federal return like clockwork, and never hears a peep from Austin. Then a notice arrives. Her business is behind on a state report she did not know existed. Far-fetched? Not at all. We would rather help you dodge that letter than help you answer it.
What Is the Texas Franchise Tax, and Does a Small Business Really Have to File?
Texas has no personal income tax, but most LLCs, corporations, and partnerships doing business here owe a franchise tax. Small does not mean exempt. Even when you owe nothing, you still send the state a yearly report. A federal S corporation election does not change that either.
Who Pays the Tax, and Who Only Files a Report?
| Your situation | Do you owe tax? | What do you file? |
|---|---|---|
| Annualized revenue at or below $2.65 million (2026 and 2027 reports) | No | An information report (PIR or OIR) |
| Revenue above $2.65 million | Yes, based on margin | The full franchise tax report |
| Entity formed this year | Depends on revenue | First report is due May 15 of next year |
| Federal S corporation | Same rules apply | Same report as any other entity |
How Is the Tax Figured Once You Cross the Line?
The rate is 0.75% of margin for most businesses, and 0.375% for retailers and wholesalers. Margin is not profit, which surprises people. Most entities can pick whichever of these four options gives the lowest number:
- 70% of total revenue.
- Revenue minus cost of goods sold.
- Revenue minus compensation.
- Revenue minus $1 million.
What Is the Deadline, and What Happens If You Miss It?
Reports are due May 15 every year, or the next business day when that date lands on a weekend. Miss it and the bill grows in steps.
| How late are you? | What can happen |
|---|---|
| Any time after May 15 | A $50 late-filing penalty per report, even if you owe zero tax |
| 1 to 30 days late | A 5% penalty on tax still unpaid |
| More than 30 days late | A 10% penalty, plus interest on the balance |
| Still delinquent after state notice | Your entity can lose its right to do business in Texas |
That last row is the scary one. A lender or title company may pull your Certificate of Status before a closing, and a business out of good standing can stall a deal for weeks.
How Does a Business Consultation Service in Texas Keep You Compliant?
A Business Consultation Service in Texas should be more than friendly advice you could find online. It is someone who studies your real numbers, your real calendar, and your real plans. Here is what that looks like for us:
- Structure: we compare an LLC, an S-Corp, and a C-Corp against your goals before you commit.
- Setup: we handle your EIN application and business formation paperwork the right way the first time.
- Calendar: we mark May 15 early and talk through whether you need an extension.
- Records: tidy books make it much faster to compare those four margin options.
What Can You Expect at Our Forest Lane Office?
You will find us at 9304 Forest Ln., Suite N156, Dallas, TX 75243. Business owners from Lake Highlands, Richardson, Garland, and Plano stop in, and plenty of others meet with us online. We ask about your entity type, revenue, and payroll. Then we map your year and write the dates down, on paper, where you can see them. Pricing is shared before any work begins. Thresholds and rules change, so we check the latest figures with the Texas Comptroller before we advise you.
When Should You Book a Business Consultation?
- You are about to form an LLC or corporation.
- Your revenue is creeping toward $2.65 million.
- You received a Comptroller notice and do not know what it means.
- You are not sure your business is in good standing.
- You just hired your first employee.
Any of those sound familiar? Call us at 214-272-3222 or email info@necomittfs.com. A short conversation now costs far less than a forfeiture fix later.