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Editorial 6 MIN READ

Texas in late 2024: the annual filing that is not a report

The state calls it a franchise tax; the filing is Form 05-158 plus Form 05-102, and most LLCs this year will owe zero

The Editors
Staff, Incorporator.org
6 min read Updated
Contents 6 sections
  1. What actually gets filed, and when
  2. The franchise-tax math, for the entities that owe it
  3. The registered-agent rule and the domestic-formation fee
  4. The new business court, now actually running
  5. How Texas compares in 2024, honestly
  6. Sources

exas does not require an annual report from LLCs. It requires a franchise-tax filing, and the franchise-tax filing carries a Public Information Report bolted to the front of it. For tax year 2024, the no-tax-due threshold sits at $2.47 million in total revenue, which means the overwhelming majority of Texas LLCs will write a zero-dollar check and still have to file.

That threshold is new. The Legislature lifted it from $1.23 million in the 2023 Special Session, and it took effect for reports due this year. If you last looked at a Texas franchise-tax obligation in 2022, the arithmetic has changed underneath you.

What actually gets filed, and when

The Texas equivalent of an annual report is a two-form stack. Form 05-158 is the franchise-tax report; Form 05-102 is the Public Information Report, which lists the entity's officers, managers or members (depending on structure), and principal office. The PIR replaces what most other states call an annual report. The comptroller accepts both through Webfile, its online filing portal, and most filers use it because paper routes through the same backlog as everything else.

The deadline is May 15. That date is written into Tex. Tax Code § 171.202, which sets the annual report as due on May 15 of each year. If the entity was formed during the prior calendar year, its first report is still due the following May 15; there is no proration of the filing itself, only of the revenue period.

If you owe no tax under the threshold, you still file. For 2024 reports, entities qualifying under the $2.47 million no-tax-due threshold no longer file the separate No Tax Due Report (Form 05-163, retired). They file the PIR alone, and the franchise tax report is not required.

The franchise-tax math, for the entities that owe it

Texas taxes margin, not income. Margin, defined in Tex. Tax Code § 171.101, is the lowest of four computations: total revenue minus cost of goods sold, total revenue minus compensation, total revenue times 70%, or total revenue minus $1 million. The base is then apportioned to Texas using a single-factor receipts formula under § 171.103 and taxed at the statutory rate.

For 2024 reports, the rates are 0.375% for entities primarily engaged in retail or wholesale trade and 0.75% for all other taxable entities. An EZ Computation is available at 0.331% of apportioned total revenue for entities with $20 million or less in annualized total revenue, with no deductions. Services firms that cross the threshold generally run the margin calc at 0.75% and compare to the EZ rate; EZ is simpler but loses the deduction options, so it wins in a narrow band of fact patterns.

The threshold itself is set by § 171.002(d) and was raised from $1.23 million to $2.47 million by HB 3 / SB 3 of the 2023 Special Session, which the comptroller implemented in guidance issued in late 2023 and early 2024. The threshold is indexed and rounded; the $2.47 million figure is the number that governs reports originally due in 2024.

A Texas LLC with $2 million of total revenue: files a PIR, owes nothing, spends fifteen minutes in Webfile, done. A Texas LLC with $5 million of total revenue and $3 million of apportioned margin: files both forms and owes $22,500 at the 0.75% rate. Below the threshold, a CPA is useful but not load-bearing.

The registered-agent rule and the domestic-formation fee

Every Texas entity needs a registered agent with a Texas street address. Tex. Bus. Orgs. Code § 5.201 requires every domestic and foreign filing entity to designate and continuously maintain a registered agent and registered office in the state. The agent must consent in writing on Form 401-A.

Forming a Texas LLC costs $300 at the Secretary of State, a fee that has not moved in years and sits in the middle of the national pack. The Certificate of Formation is Form 205. There is no annual report fee and no franchise-tax liability under the $2.47 million threshold, so the total first-year cash outlay for a small Texas LLC is a one-time $300 plus the registered-agent charge.

Foreign qualification is the exception. An out-of-state LLC registering to do business in Texas files Form 304 and pays $750, by a comfortable margin the most expensive foreign-qualification fee in the country. Delaware charges $200 for the equivalent filing; California charges $70; Florida charges $125. The $750 number has been criticized for years and has not changed. For a business that will operate in Texas, the foreign-qual cost usually tips the decision toward forming in Texas in the first place.

The new business court, now actually running

A piece of Texas business-formation calculus that was theoretical in 2023 became operational on September 1, 2024. HB 19 of the 88th Legislature created a specialized business court under Tex. Gov. Code Ch. 25A, giving Texas its own forum for complex commercial disputes of the sort Delaware's Court of Chancery has handled since the nineteenth century. Five divisions opened on September 1; the remainder are scheduled for September 1, 2026. The structure survived a sunset concern briefly live in the 2023 session.

Jurisdiction is limited. The business court hears actions involving publicly traded companies, disputes over $5 million in controversy between qualifying entities, and certain governance and securities cases defined in § 25A.004. It is not a general business forum and will not hear a run-of-the-mill LLC dispute over a $200,000 distribution. For entities that do qualify, it offers written opinions and judges with commercial-litigation backgrounds, which is the feature set sophisticated parties pay for. Whether it produces case law a chief legal officer treats as persuasive is a question for the back half of the decade.

How Texas compares in 2024, honestly

Against Delaware's $90 formation plus $300 annual LLC tax, Texas charges $300 to form and nothing annually for an LLC under the $2.47 million threshold. The Texas LLC with $1 million in revenue is therefore cheaper than its Delaware counterpart by $300 every year after formation. Over five years that is a $1,500 difference, real money for a small operating business and a rounding error for anything with venture capital.

The $750 foreign-qualification fee reshapes the comparison for businesses that operate in Texas but form elsewhere. Form a Delaware LLC ($90) and foreign-qualify in Texas ($750): you are at $840 on day one, against $300 for a domestic Texas formation, and you still owe the Delaware $300 every June. Unless the business has a specific reason to want Chancery (venture financing, anticipated acquisition, multi-state holding structure), the math favors forming in Texas.

Where Texas gets expensive is for the LLC that has crossed the $2.47 million threshold. The margin tax on service businesses at 0.75% is materially heavier than Delaware's $300 flat LLC fee or Wyoming's $60 annual report. Small Texas LLCs pay nothing, mid-sized Texas LLCs pay less than most active states, large Texas LLCs pay more than most flat-fee states but still less than California on a gross-receipts basis.

If you are forming this quarter and the business will operate in Texas, file the Certificate of Formation with the Secretary of State, set your registered agent, and put May 15 on the calendar. Whether you file a PIR alone or a PIR plus a franchise-tax report depends on a number you will not know until your 2024 books close, and that is the right order to learn it in.

Sources

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