If your business operates multiple entities under common control, Texas may require you to file a combined Franchise Tax Report as a unitary group. Ignoring this rule could lead to underreporting, penalties, and even forfeiture. Here’s what every holding company, affiliate group, and multi-LLC structure must know in 2025.
What Is a Unitary Group?
Under Texas Tax Code §171.0001(17) and Rule 3.590, a unitary group is:
- Two or more affiliated entities,
- Engaged in a unitary business,
- That must file as one taxpayer for Franchise Tax purposes.
“Unitary business” means the entities are functionally integrated and centrally managed, even if separately incorporated.
When Are You Required to Combine?
You must file as a unitary group if:
- Entities share common ownership (more than 50%)
- They conduct related business activities
- There’s centralized control, shared resources, or financial interdependence
- They’re not excluded (e.g., foreign entities with no U.S. nexus)
There is no election required , unitary filing is mandatory if the criteria are met.
Example: SaaS Holding Company with Multiple Subsidiaries
Group Structure:
- ParentCo (Delaware holding company)
- DevOps TX LLC (Texas-based software team)
- SalesCo LLC (remote U.S. sales)
- IPHold LLC (owns code and trademarks)
Scenario:
- All entities are >50% owned by ParentCo
- Share management, tech stack, and payroll
- Conduct a single line of business (SaaS)
Result:
- They must file a combined Franchise Tax Report
- Each member’s revenue and deductions are pooled
- One Form 05-158-A is filed with detailed schedules
Step-by-Step: Filing a Combined Report in 2025
- Determine if your entities meet unitary test
- Ensure all members are properly registered with the Texas SOS and Comptroller
- Assign a reporting entity
- File Form 05-158-A (Long Form) with supplemental schedules
- Include a Combined Group Report (Schedule G) and Ownership Info (Schedule H)
Key Points to Remember
- Unitary filing is mandatory, not elective
- Failure to combine can result in penalties and back taxes
- You cannot cherry-pick entities , all eligible members must be included
- Out-of-state entities are included if they have Texas nexus
Conclusion
If your business operates with multiple connected entities, Texas may treat you as a unitary group for Franchise Tax purposes. Ignoring these rules can create exposure, but with the right structure and filings, you can avoid double taxation and maintain compliance.
Call to Action
Schedule a tax structure review with Anshul Goyal, CPA, EA, FCA to ensure your group meets Texas unitary rules and to file your combined Franchise Tax return correctly.
Disclaimer:
This blog is for educational use only. Combined reporting rules under Texas Tax Code §171.0001 and Rule 3.590 are mandatory if control and business integration tests are met. Consult a tax advisor for entity-specific guidance.
Top 5 High-Searched FAQs
1. What is a unitary group in Texas?
Two or more affiliated entities under common control conducting a related business.
2. Is combined reporting optional in Texas?
No. It’s required if the unitary criteria are met.
3. What form is used for combined Franchise Tax?
Form 05-158-A, with Schedules G and H.
4. Do out-of-state entities need to be included?
Yes, if they have nexus in Texas.
5. What happens if I don’t combine when required?
You may face penalties, interest, and amended return requirements.
About Our CPA
Anshul Goyal, CPA, EA, FCA helps founders and CFOs of multi-entity businesses properly structure, report, and optimize their group tax positions in Texas and across the U.S. He specializes in unitary group reporting, holding company compliance, and tax-efficient business structuring.