Texas LLC Franchise Tax in 2026: What You Owe (No Annual Report Required)

Texas is routinely ranked among the most business-friendly states in the country. No personal income tax, a relatively low cost of doing business, and a straightforward LLC formation process make it a natural choice for entrepreneurs. But one compliance requirement catches new LLC owners off guard every single year: the Texas franchise tax.

Here’s the confusion point that matters: Texas does not require LLCs to file an annual report. If you’re searching for “Texas LLC annual report” and finding nothing, that’s because it doesn’t exist — at least not in the traditional sense. Instead, Texas collects a franchise tax, officially processed through a combined filing called the Franchise Tax and Public Information Report, submitted annually to the Texas Comptroller of Public Accounts.

Same concept, completely different name, different rules, and different thresholds. Get this wrong and you’re looking at penalties, interest, and potential forfeiture of your LLC’s right to do business in Texas.

If you haven’t yet formed your Texas LLC, services like Northwest Registered Agent (starting at $39 + state fees) will handle your formation paperwork and serve as your registered agent — meaning official state notices, including franchise tax correspondence from the Comptroller, land at a proper Texas address and get forwarded to you promptly. That alone prevents a lot of compliance headaches down the road.

This guide covers everything you need to know about the Texas LLC franchise tax in 2026: who owes it, the current rates, the no-tax-due threshold, filing deadlines, and common mistakes to avoid.

Texas Has No Annual Report — But It Does Have a Franchise Tax

Most states require LLCs to file an annual report — a simple document confirming the business is still active, updating registered agent information, and paying a nominal fee. Texas took a different approach.

Instead of an annual report, Texas imposes a franchise tax on most entities doing business in the state, including LLCs, corporations, limited partnerships, and professional associations. The legal authority comes from the Texas Tax Code, Chapter 171, administered by the Texas Comptroller of Public Accounts.

The filing is called the Texas Franchise Tax Report, and for most LLCs it’s bundled with the Public Information Report (PIR) — a short form that discloses ownership information and is the closest thing Texas has to a traditional annual report. Both are filed together, annually.

Think of it this way: the Public Information Report is the “who are you” filing, and the Franchise Tax Report is the “what do you owe” filing. For small LLCs under the revenue threshold, the answer to “what do you owe” is usually $0 — but you still have to file.

Who Owes the Texas Franchise Tax?

Every LLC organized in Texas or doing business in Texas is subject to the franchise tax. “Doing business” is defined broadly — if you have a physical location in Texas, employees in Texas, or are generating revenue from Texas customers, you’re in scope.

There are a few exemptions worth knowing:

Sole proprietorships and general partnerships (where all partners are natural persons) are exempt from franchise tax.
Certain passive entities — LLCs that earn at least 90% of their income from passive sources like dividends, interest, royalties, or real estate rents — may qualify for passive entity treatment and owe $0, though they still must file.
Qualified nonprofits organized under IRC 501(c) may be exempt, subject to Comptroller approval.

If your LLC was formed in Texas but hasn’t yet started generating revenue, you still have a filing obligation in most cases. The franchise tax clock starts when your LLC is organized or when it first does business in Texas, whichever comes first.

Texas Franchise Tax Rates for 2026: The Numbers You Need to Know

The Texas franchise tax is calculated on taxable margin, not gross revenue. Taxable margin is the lesser of four calculations:

Total revenue minus cost of goods sold (COGS)
Total revenue minus compensation
Total revenue times 70%
Total revenue minus $1 million

Once taxable margin is determined, the applicable tax rate is applied:

Business Type	Tax Rate
Most businesses (retailers, service firms, etc.)	0.75% of taxable margin
Businesses primarily engaged in wholesale/retail	0.375% of taxable margin
EZ Computation (small businesses electing simplified method)	0.331% of total revenue

The EZ Computation option is available to businesses with annual total revenue of $20 million or less. It simplifies the math significantly — you just multiply your total revenue by 0.331% — and for most small LLCs, it produces a lower tax bill than the standard calculation.

In my experience working with small business owners, the majority of Texas LLCs with revenue under $5 million benefit from electing EZ Computation rather than laboring through the four-method standard calculation. Unless you have a very high COGS or compensation base, the EZ method is simpler and often cheaper.

The No Tax Due Threshold: Why Most Small Texas LLCs Pay $0

This is the most important number in Texas franchise tax law for small business owners: the no tax due threshold.

For 2026, the threshold is $2.47 million in annualized total revenue. If your LLC’s total revenue for the year is below this amount, you owe zero franchise tax.

You still have to file. You still need to submit the No Tax Due Report and the Public Information Report by the deadline. But your check to the Comptroller is $0.

This threshold has increased significantly over the years — it was $1.18 million as recently as 2021. The 2026 figure reflects inflation adjustments the Comptroller applies periodically under Texas Tax Code §171.002(d).

What this means in practice: The vast majority of small Texas LLCs — solo consultants, freelancers, small retailers, real estate investors with modest portfolios, early-stage startups — will qualify for the no tax due threshold every year. The filing obligation is real, but the tax liability is often zero.

For context on how this compares to other states: Delaware charges LLCs a flat $300 annual franchise tax regardless of revenue, and California imposes an $800 minimum franchise tax on LLCs plus a gross receipts fee that kicks in above $250,000. Texas’s zero-liability threshold for small businesses is genuinely generous. You can read more about Delaware’s approach in our Delaware LLC Annual Franchise Tax guide.

How to File the Texas Franchise Tax Return (Step-by-Step)

1. Know Your Deadline

The standard Texas franchise tax due date is May 15 each year. For the 2026 tax year (reporting on 2025 revenue), the deadline is May 15, 2026.

Extensions are available — a 30-day automatic extension gets you to June 15 if you file a request before the original deadline. An additional extension to November 15 is available with a second request and payment of any estimated tax owed.

2. Gather Your Revenue Figures

You’ll need your total gross revenue for the prior calendar year. This is typically pulled from your federal tax return or your profit and loss statement. “Total revenue” for Texas franchise tax purposes generally follows federal gross income definitions under IRS guidance, with some specific exclusions outlined in Texas Tax Code §171.1011.

3. Determine Which Report to File

No Tax Due Report (Form 05-163): If total revenue is below $2.47 million (2026 threshold).
EZ Computation Report (Form 05-169): If total revenue is $20 million or less and you elect the simplified method.
Long Form Report (Form 05-158): If total revenue exceeds $20 million or you’re using the standard margin calculation.

All LLCs must also file the Public Information Report (Form 05-102), which asks for the names and addresses of owners (members) and officers. This is what keeps your LLC’s public record current with the state.

4. File Online Through WebFile

The Texas Comptroller’s WebFile system (available at comptroller.texas.gov) is the standard filing portal. Most LLCs can complete the entire process in under 30 minutes for a no-tax-due filing. The system accepts payment by ACH or credit card if you owe tax.

5. Keep Confirmation Records

After filing, save your confirmation number and the filed copies of your reports. The Comptroller’s office can take several weeks to update online records — don’t assume non-receipt of a notice means your filing wasn’t processed.

Common Mistakes Texas LLC Owners Make With Franchise Tax

Mistake #1: Confusing “no annual report” with “no filing required.” This is the big one. Texas doesn’t have an annual report, but it absolutely has a filing requirement. Missing the May 15 deadline — even if you owe nothing — triggers a $50 late filing penalty and potential delinquency status.

Mistake #2: Not filing the Public Information Report. The PIR must accompany the franchise tax filing. Omitting it, or failing to update ownership information when members change, creates compliance gaps and can expose your LLC to administrative complications.

Mistake #3: Using the wrong revenue figure. Texas franchise tax uses “total revenue” as defined under Texas law, not necessarily the same number on your federal return. Certain items are excluded (e.g., revenue from excluded services, certain flow-through funds). If your LLC is near the $2.47 million threshold, it’s worth having a Texas CPA review your revenue calculation.

Mistake #4: Missing the first-year filing. A newly formed LLC’s first franchise tax report is due the year after formation — covering the period from the formation date through December 31 of that year. LLCs formed in 2025 will file their first report by May 15, 2026. Missing this because you thought you didn’t owe anything in the first year is a common and avoidable error.

Mistake #5: Letting registered agent service lapse. The Comptroller sends notices — including delinquency notices — to your registered agent’s address on file. If your registered agent service lapses or you use an unreliable provider, you may not receive notices until penalties have already accrued.

This is one area where choosing a reputable registered agent matters more than most business owners realize. Services like Northwest Registered Agent and ZenBusiness both include registered agent service in their formation packages. Northwest’s registered agent service runs $125/year as a standalone, while ZenBusiness bundles it into plans starting at $0 + state fees for the first year. If you want a deep comparison, see our Northwest vs ZenBusiness breakdown.

How to Form a Texas LLC and Stay Compliant From Day One

If you’re still in the formation stage, Texas LLC compliance starts with choosing the right structure and getting your paperwork right from day one. Here’s a quick overview of what’s required:

File a Certificate of Formation with the Texas Secretary of State ($300 filing fee).
Appoint a registered agent with a physical Texas address.
Draft an Operating Agreement (not legally required in Texas, but strongly recommended — see our LLC Operating Agreement Guide).
Obtain an EIN from the IRS (free, takes minutes online).
Open a business bank account to maintain separation between personal and business funds.
Register for Texas taxes with the Comptroller, including franchise tax if applicable.

For a full walkthrough, our How to Start an LLC in Texas guide covers every step in detail.

If you’d prefer to hand off the paperwork, ZenBusiness starts at $0 + state fees and includes a registered agent for the first year — a strong value for cost-conscious founders. LegalZoom charges more (typically $249+ for the basic package) but offers attorney-backed services that some business owners find reassuring. For an unbiased comparison across providers, see our Best LLC Formation Services roundup.

Thinking beyond formation, understanding how your LLC is taxed federally is just as important as state compliance. Many Texas LLC owners eventually consider S-Corp election once profits reach a certain level — our LLC vs S-Corp guide covers when that election makes sense and what it costs to set up.

Frequently Asked Questions

Does Texas require an annual report for LLCs?

No. Texas does not have an annual report requirement for LLCs. Instead, Texas requires LLCs to file an annual Franchise Tax Report and a Public Information Report with the Texas Comptroller. These serve a similar function — updating ownership information and satisfying a state filing obligation — but they are structured differently from annual reports in states like Florida or California.

What is the Texas franchise tax rate for LLCs in 2026?

Most Texas LLCs pay a rate of 0.75% of taxable margin. Businesses primarily engaged in wholesale or retail pay 0.375%. LLCs with annual revenue of $20 million or less may elect the EZ Computation method, which applies a flat 0.331% rate to total revenue and is often the simplest and lowest-cost option for small businesses.

What is the no tax due threshold for Texas franchise tax in 2026?

The no tax due threshold for 2026 is $2.47 million in annualized total revenue. LLCs with total revenue below this amount owe zero franchise tax, though they must still file a No Tax Due Report and a Public Information Report by May 15, 2026.

When is the Texas franchise tax due in 2026?

The standard deadline is May 15, 2026, covering revenue earned in calendar year 2025. A 30-day extension (to June 15) is available by request. A second extension to November 15 is also available, but you must estimate and pay any tax owed by the original deadline to avoid penalties.

What happens if I don’t file the Texas franchise tax report?

Missing the filing deadline triggers a $50 late filing penalty. If the delinquency continues, the Comptroller can issue a $50 monthly penalty (up to 10% of the tax due, with a $1,000 minimum in some cases) and eventually initiate forfeiture proceedings against your LLC’s right to do business in Texas. Forfeited entities lose certain legal protections, including the ability to bring lawsuits in Texas courts.

Do I have to file a Public Information Report even if I owe no franchise tax?

Yes. The Public Information Report is required for all LLCs subject to the franchise tax, regardless of whether any tax is owed. It must be filed annually along with the Franchise Tax Report (or No Tax Due Report). Failing to file the PIR — even if your tax liability is zero — is a compliance violation.

Can a single-member LLC in Texas be exempt from franchise tax?

A single-member LLC is not automatically exempt. The franchise tax applies to all LLCs doing business in Texas unless a specific exemption applies (such as passive entity status or nonprofit exemption). However, most single-member LLCs with revenue under $2.47 million will qualify for the no tax due threshold and owe $0, though the filing obligation still applies.

Does Texas franchise tax apply to LLCs formed in other states?

Yes. If an out-of-state LLC is registered to do business in Texas (i.e., it has filed a Foreign LLC Registration with the Texas Secretary of State or otherwise meets the “doing business” standard under Texas law), it is subject to Texas franchise tax on its Texas-sourced revenue. The same rates, thresholds, and filing requirements apply.

The Bottom Line on Texas LLC Franchise Tax in 2026

Texas’s approach to LLC compliance is genuinely business-friendly once you understand what it actually requires. There is no annual report — just the franchise tax filing, which costs most small LLCs nothing but a bit of time each May.

The key points to remember heading into 2026:

No annual report. File the Franchise Tax Report + Public Information Report instead.
No tax due if revenue is under $2.47 million — but you must still file.
May 15 is the deadline. Extensions are available but must be requested proactively.
The Public Information Report is mandatory regardless of tax liability.
Use WebFile through the Texas Comptroller’s website to file quickly and keep records.

Texas is one of the more manageable states for ongoing LLC compliance — as long as you know what you’re actually filing. If you’re still in the formation phase, start with a solid foundation by using a reputable formation service and reliable registered agent. And if you’re already operating, put May 15 on your calendar today.

For more on forming and running a Texas LLC, see our full How to Start an LLC in Texas guide.

The author name used in this article may be a pen name or pseudonym and is used for illustrative and editorial purposes only. This article is for informational purposes only and does not constitute investment, tax, or legal advice. Tax thresholds, rates, and deadlines are subject to change; always verify current figures directly with the Texas Comptroller of Public Accounts before filing. Consult a qualified CPA or tax attorney before making financial or business structure decisions.