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Tag: Texas franchise tax
S-Corp vs LLC in Texas
Choosing between an LLC and an S-Corporation in Texas? While both can limit liability and offer pass-through taxation, they differ greatly in how the Texas Franchise Tax (margin tax) and federal payroll taxes apply. Here’s how to decide what’s best for your business in 2025. LLC vs S-Corp: Federal Classification At the federal level: A […]
QSBS & Texas: Does the State Tax Your 0% Federal Gain?
Qualified Small Business Stock (QSBS) under IRC §1202 offers a powerful tax exemption of up to 100% of federal capital gains. But what about Texas? Does your 0% federal gain remain tax-free at the state level? What is QSBS? Qualified Small Business Stock (QSBS) refers to shares acquired in a qualified C-Corporation under IRC §1202, […]
Annualized Revenue Test: Avoiding a Surprise Texas Tax Bill
Annualized Revenue Test If your Texas franchise-tax reporting period isn’t a full 12 months—because you formed or acquired the business mid-year, changed your fiscal year, or operate on a short tax period—you must annualize your total revenue to determine: Whether you fall under the $2.47 million no-tax-due threshold, and Whether you qualify for the E-Z […]
Franchise-Tax Extensions: Form 05-164 Walk-Through
Franchise-Tax Extensions If you need extra time to prepare your Texas franchise-tax report, Form 05-164 gives you a six-month extension—from May 15 to November 15—to file. Note, however, that an extension does not extend your payment deadline. You must still remit at least 90 percent of your estimated tax liability by the original due date […]
$50 “Late Report” Fine: How to Abate It With One Letter
$50 “Late Report” Fine If you’ve filed your Texas franchise-tax report late—even if no tax is due—you automatically incur a $50 late-filing fee per report. Fortunately, Texas law allows you to request a waiver of that flat fee (and any related interest or penalties) with a single letter or form. In this post, we’ll explain […]
Late Texas Franchise-Tax Payment? Interest & Penalty Math
Texas Franchise-Tax Payment Missing the May 15 filing or payment deadline for your Texas franchise-tax can trigger multiple charges: a flat late-filing fee, percentage-based penalties, and accruing interest. Understanding how each is calculated—and how quickly they add up—helps you assess the real cost of a late payment and explore possible waiver options. Applicable Tax Authority […]
E-Z Computation (0.331 %) for SaaS Startups Under $20 M Revenue
E-Z Computation For Texas entities with annualized total revenue of $20 million or less, the E-Z Computation method offers a simplified franchise tax calculation at a flat 0.331 % rate. This option eliminates complex deductions (COGS, compensation, 70% of revenue, or $1 million) in exchange for a straightforward multiplier—ideal for SaaS founders looking to minimize […]
Step-by-Step: Completing the Texas Public Information Report
Texas Public Information Every Texas-taxable entity must file a Public Information Report (PIR) each year, even if no franchise tax is due. The PIR ensures the Comptroller’s office—and the public—has up-to-date ownership and contact information for corporations, LLCs, partnerships, and other entities with Texas nexus. Missing or incomplete PIRs can lead to notices, late-filing fees, […]
0.375 % vs 0.75 %: Which Texas Franchise-Tax Rate Applies to You?
Introduction Texas imposes two different franchise-tax rates—0.375 % and 0.75 %—depending on whether your business is primarily engaged in retail or wholesale trade. Getting the rate wrong can lead to under-payment penalties or over-paying unnecessarily. This guide will help you determine which rate applies, illustrate with examples, and walk you through how to report the […]
Total Revenue vs. Cost-of-Goods: Picking the Best Texas Margin Method
Total Revenue vs. Cost-of-Goods Texas franchise tax is based on a business’s margin, but there are four distinct ways to calculate it. Choosing the method that minimizes your taxable margin can save you thousands. In this post, we’ll compare: Total Revenue × 70% Total Revenue − Cost-of-Goods Sold (COGS) Total Revenue − Compensation Total Revenue […]