Can an LLC be Tax Exempt in Texas?

Due to its adaptable form and liability protection, Limited Liability Companies (LLCs) are popular among business owners and small enterprises. However, LLCs are handled differently than corporations in terms of taxes. Although Texas LLCs are liable to some taxes, in some situations they may be qualified for tax exemptions.

In Texas, LLCs are ordinarily subject to the state’s franchise tax, which is a charge for the right to conduct business there. A company’s taxable margin, which is simply its gross receipts less any deductions, is used to calculate the franchise tax. The tax rate varies based on the type of business and its yearly revenue, however for the majority of firms, it is typically 0.375%.

Texas LLCs may be charged additional taxes, such as sales tax, property tax, and employment tax, in addition to the franchise tax. While property tax is a tax on real estate and other types of property, sales tax is a tax on the sale of products and services. Payroll taxes, such as Social Security and Medicare taxes, as well as unemployment insurance taxes are all considered employment taxes.

However, there are several situations in Texas where LLCs may qualify for tax exemptions. For instance, an LLC may be eligible for the “no tax due” threshold exemption if its yearly revenue is below a specific level. Franchise tax is not due by companies with yearly revenues of $1,180,000 or less thanks to this exemption. Some LLCs might also be qualified for additional exemptions, including the “EZ computation” or “cost of goods sold” exemptions.

LLCs must finish and submit Forms 05-163, Texas Franchise Tax Public Information Report, and 05-164, Texas Franchise Tax Report, in order to file a Texas franchise tax. The deadline date for most businesses to file the forms is May 15th of each year. LLCs must also settle any outstanding franchise taxes by this date.

In Texas, a set of entities engaging in a business venture and dependent on one another is referred to as a unitary business. When determining its taxable margin for franchise tax purposes, an LLC that is a component of a unitary firm must take into account the aggregate revenue of all entities that make up the group. This may have an impact on the LLC’s franchise tax liability.

Finally, Texas LLCs must fill out and submit Form 05-359, Request for Certificate of Account Status, in order to get a tax clearance certificate online. The certificate will be given if the LLC has no unpaid tax debts, and the form can be submitted online via the Texas Comptroller’s website.

In conclusion, LLCs in Texas are liable to some taxes, such as the franchise tax, although under certain conditions they can be eligible for tax exemptions. LLCs must complete and submit the necessary forms by May 15 of each year in order to file a Texas franchise tax. When determining franchise tax, LLCs that are a member of a unitary business must take into account the aggregate revenue of all the group’s businesses. LLCs must file Form 05-359 through the Texas Comptroller’s website to request a tax clearance certificate.