Do You Pay Franchise Tax in Texas?

Whether or not you must pay franchise tax is one of the crucial decisions you must make as a business owner in Texas. Simply explained, a franchise tax is a charge placed on companies that are established or run in Texas. The tax is assessed based on the taxable margin of the business entity, which is simply its total sales less a few permitted deductions.

Depending on the kind of business entity, a company in Texas may have to pay a different amount in franchise tax. While the tax is based on the taxable margin for corporations, it is based on the owner’s portion of the taxable margin for limited liability companies (LLCs) and partnerships.

It is crucial to remember that failing to pay franchise tax in Texas might have major repercussions for your company. The Texas Comptroller’s office is empowered to impose fines and interest on unpaid taxes and even to cancel a company’s license to conduct business in the state.

Can a Business Continue to Run After Being Dissolved?

If a company is dissolved, it indicates that its operations have been officially ended and that it is no longer in existence. In Texas, a company can be shut down voluntarily by the owners or forcibly by the government.

If a company is forced to dissolve by the state, it is because it didn’t follow certain legal criteria, such paying taxes or publishing annual reports. In this situation, the company is no longer allowed to function legally in the state. On the other side, a company can no longer exist under its original name if it is voluntary dissolved by the proprietors. However, the proprietors might be able to go on running the company as a new corporation or under a different name. Who Is the Owner of a Dissolved Company’s Assets?

Normally, the assets of a company that is closing down are liquidated and used to settle any remaining liabilities. The business’s shareholders are subsequently given any leftover assets in proportion to their ownership stakes.

In a company, the shareholders receive the assets according to the number of shares they own. Assets are dispersed to the shareholders of an LLC or partnership according to their proportionate ownership.

The finding is that companies doing business in Texas must pay franchise tax. Serious repercussions could arise from not doing so. Dissolving a business allows its assets to be allocated among the owners in accordance with their ownership stakes, but it prevents it from continuing to function under its original name.