Single Member LLC – Texas – Franchise Tax

Do single member LLC’s in Texas avoid the payment of the Texas franchise tax (margin tax)?

– Joe, Texas

Answer

Unfortunately, no.

According to the the Texas Comptroller’s site, the Franchise Tax is imposed on the following:

      The franchise tax is imposed on each corporation that is chartered in Texas and each non-Texas corporation that does business in Texas. See Franchise Tax Rule 3.546 for a list of some activities considered to be “doing business in Texas.”
      For franchise tax purposes, the term “corporation” also includes a bank, state limited banking association, savings and loan association,

limited liability company

      , professional limited liability company, a corporation that elects to be an S corporation for federal income tax purposes, and a professional corporation. Professional associations and partnerships are not subject to the franchise tax.

There is some good news for small Texas businesses, however:

    Corporations will not owe any tax if the gross receipts from their entire business for both taxable capital and taxable earned surplus are each less than $150,000 during the period upon which the tax is based. These corporations must file an abbreviated information report.

See the Texas Comptroller’s page for more information about the Texas Franchise Tax.

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