That distinction is the key to understanding the rule. “Subject to franchise tax” describes the entity’s place within the Texas tax system. “Owes franchise tax” describes whether a payment is actually due after applying the current threshold and calculation rules. “Must file” describes the reporting obligation, which can continue even when the amount owed is zero.
The short answer
A Texas LLC generally falls within the definition of a taxable entity. That includes single-member LLCs, even when the owner reports the business as a sole proprietorship for federal income-tax purposes. Texas also treats many out-of-state LLCs as taxable entities when they are doing business or have nexus in the state.
For the 2026 and 2027 report years, the practical result is:
| LLC situation | Franchise tax payment | Typical filing requirement |
|---|---|---|
| Annualized total revenue at or below $2.65M | Generally $0 | PIR generally still required |
| Revenue above $2.65M but calculated tax is under $1,000 | $0 payment | Franchise tax report + PIR still required |
| Revenue above threshold and tax is at least $1,000 | Tax generally due | Franchise tax report + PIR |
| Qualifying new veteran-owned business during initial five-year period | Generally exempt under special rule | No PIR during qualifying period |
| Entity with a specific franchise-tax exemption | Depends on exemption | Special rules apply |
The first two rows are especially important because both can result in no payment, but they do not have the same filing process.
Why are LLCs subject to the Texas franchise tax?
Texas imposes franchise tax on taxable entities formed in Texas or doing business in Texas. The Comptroller’s guidance specifically includes limited liability companies, including single-member LLCs and series LLCs, among the entities subject to the tax system.
The franchise tax is an entity-level Texas tax rather than a federal income tax. That means the way an LLC is classified for federal income-tax purposes does not automatically remove it from Texas franchise-tax rules. An LLC can be disregarded for federal tax, taxed as a partnership, or elect corporate treatment and still remain a taxable entity for Texas franchise-tax purposes when the Texas rules apply.
What is the Texas franchise tax threshold for an LLC in 2026 and 2027?
For report years 2026 and 2027, the Texas Comptroller lists a No Tax Due Threshold of $2.65 million in annualized total revenue. A taxable LLC at or below that threshold generally does not owe franchise tax.
The phrase annualized total revenue matters. The test is not simply net profit, taxable income or money left in the company’s bank account. Texas uses its own total-revenue rules, and a short accounting period can require revenue to be annualized before it is compared with the threshold.
If an LLC is under $2.65 million, does it still have to file?
For most ordinary LLCs, yes. Beginning with reports originally due on or after January 1, 2024, Texas discontinued the old No Tax Due Report for entities at or below the threshold. Those entities generally do not file a franchise-tax computation report, but they are still required to file the appropriate information report. For an LLC, that is normally the Public Information Report, Form 05-102.
This is where older articles and forum advice can create confusion. Before 2024, a small business owner might have expected to submit a No Tax Due Report. That form is no longer the standard filing for current report periods.
What is the Public Information Report?
The Public Information Report is the annual information filing used by corporations, LLCs, limited partnerships, professional associations and financial institutions that are organized in Texas or have nexus in Texas. It reports information about the entity and its ownership or management structure and is filed with the Texas Comptroller.
For an LLC, the report can include items such as principal office information and details about members or managers as required by the form. The practical implication is that a zero tax bill does not eliminate the annual compliance step.
Does a single-member LLC have to pay Texas franchise tax?
A single-member LLC is still a taxable entity for Texas franchise-tax purposes, even if it is treated as a sole proprietorship for federal income-tax reporting. Whether that single-member LLC actually pays franchise tax then depends on the same Texas thresholds and calculations that apply to other taxable entities.
If its annualized total revenue is at or below $2.65 million for the 2026 or 2027 report year, it generally owes no tax but still has the usual PIR requirement unless a specific exception applies.
What if the LLC elected S corporation tax treatment?
An S corporation election affects federal tax treatment; it does not by itself remove the business from Texas franchise-tax rules. An LLC that has elected S corporation treatment federally should therefore still evaluate its Texas franchise-tax obligations under Texas law.
The same general principle applies to an LLC taxed as a partnership. Federal classification can affect the federal return, but Texas determines franchise-tax obligations under its own statutory framework.
Does an out-of-state LLC have to pay Texas franchise tax?
Potentially. Texas does not limit franchise tax to entities that were formed in Texas. A taxable entity formed elsewhere can become subject to Texas franchise-tax requirements if it is doing business in Texas or has Texas nexus.
Once the foreign LLC is within the Texas franchise-tax system, the same distinction between payment and filing becomes relevant. A company can have Texas nexus, owe no franchise tax because of the threshold and still have a PIR requirement.
What if an LLC has revenue above $2.65 million but calculates less than $1,000 in tax?
This is a separate no-payment rule that is easy to miss.
If a taxable entity has annualized total revenue above the No Tax Due Threshold but calculates franchise tax of less than $1,000, the entity does not have to pay the tax. However, unlike an entity that is below the $2.65 million revenue threshold, it must still file a franchise-tax report supporting the calculation, along with the applicable information report.
That creates two different paths to a $0 payment: below the revenue threshold, where the normal franchise-tax report is generally not filed; and above the threshold but with calculated tax below $1,000, where a Long Form or EZ Computation report is still required.
What franchise tax rates apply when an LLC does owe tax?
For 2026 and 2027, the published Texas franchise-tax rate is 0.375% for qualifying retail or wholesale entities and 0.75% for other taxable entities. Businesses eligible for the EZ Computation method can use a 0.331% rate, subject to the rules of that method. The current EZ Computation revenue ceiling is $20 million.
The rate is not applied mechanically to gross revenue in every case. Under the regular method, the calculation involves taxable margin, allowable deductions and apportionment. EZ Computation uses a different structure and restricts certain deductions and credits.
When is the Texas LLC franchise tax filing due?
Annual Texas franchise-tax filings are generally due May 15. The PIR follows the same annual franchise-tax due date. If the due date falls on a Saturday, Sunday or qualifying legal holiday, the filing deadline moves to the next business day.
For an LLC at or below the No Tax Due Threshold, that date is still relevant even though no franchise-tax payment is due, because the PIR generally remains an annual requirement.
What about a newly formed LLC?
A newly taxable entity generally begins annual franchise-tax reporting based on the rules for the year after it becomes subject to the tax. The accounting period used for that first report can depend on the entity’s federal accounting year and the date it became subject to Texas franchise tax.
That means “I just formed the LLC” is not enough information to determine exactly which accounting period belongs on the first filing.
Are there LLCs that do not have the normal franchise-tax and PIR requirements?
Yes, but the exceptions are narrower than the ordinary small-business rule.
One important example is a qualifying new veteran-owned business. Texas provides a special initial five-year period during which a qualifying entity is not subject to franchise tax and is not required to file a PIR or OIR. Qualification is not automatic merely because an owner is a veteran.
Entities that are specifically exempt from Texas franchise tax can also have different obligations.
What happens if an LLC does not file its PIR?
Failing to file the PIR can become much more serious than simply missing an informational form. Even when no franchise-tax report or tax payment is otherwise due, an entity can forfeit its right to transact business if it does not file a completed and signed PIR or OIR.
Potential effects of forfeiture can include losing the entity’s right to sue or defend in a Texas court, and Texas law can impose personal liability on certain officers, directors, partners, members or owners for specified debts arising during the forfeiture period.
That makes the annual filing obligation more than a paperwork technicality. A small LLC can owe zero dollars and still create a significant compliance problem by ignoring the PIR.
How bookkeeping affects the franchise-tax filing
For a small LLC below the threshold, the tax calculation itself may be straightforward, but the revenue determination still depends on the company’s underlying financial records. As the business grows toward the threshold, the accuracy of those records becomes increasingly important.
If the company is above the threshold, bookkeeping matters even more. Revenue, deductions, Texas receipts and other financial information can affect the Long Form or EZ Computation analysis.
An LLC with current books can generally move directly into the tax review. If several accounting periods are missing, /catch-up-bookkeeping/ may need to come first. If the records exist but balances cannot be trusted, /bookkeeping-cleanup/ is the better starting point.
The practical rule for most Texas LLC owners
The simplest way to think about Texas franchise tax is to stop treating “pay” and “file” as the same question.
First determine whether the LLC is a taxable entity with Texas nexus. For an ordinary Texas LLC, the answer is generally yes. Next compare annualized total revenue with the current threshold. At or below $2.65 million for 2026–2027, the LLC generally owes no franchise tax but still files its PIR. Above the threshold, calculate the applicable franchise tax and determine whether Long Form or EZ Computation rules apply. Even there, a calculated liability below $1,000 can result in no payment while still requiring the tax report.
Frequently asked questions
Does every Texas LLC pay franchise tax?
No. Texas LLCs are generally taxable entities, but many owe $0 because their annualized total revenue is at or below the $2.65 million No Tax Due Threshold for 2026 and 2027. Most still have to file the Public Information Report.
Does a single-member LLC pay Texas franchise tax?
A single-member LLC is a taxable entity for Texas franchise-tax purposes even if it is disregarded and reported as a sole proprietorship federally. Whether it actually owes a payment depends on Texas revenue and calculation rules.
What is the Texas LLC franchise tax threshold for 2026 and 2027?
The No Tax Due Threshold is $2.65 million in annualized total revenue for both report years.
Does a Texas LLC still file a No Tax Due Report?
No for current report years. Texas discontinued the No Tax Due Report for reports originally due on or after January 1, 2024. Most LLCs below the threshold now file only the Public Information Report.
What if the LLC calculates less than $1,000 in franchise tax?
If annualized total revenue is above the threshold but the calculated tax is less than $1,000, the entity generally owes no payment but still must file the appropriate franchise-tax report and information report.
Does an S corporation election eliminate Texas franchise tax for an LLC?
No. A federal S corporation election does not by itself remove an LLC from the Texas franchise-tax system.
When the LLC needs more than a threshold answer
For many small LLCs, the answer is straightforward: the entity is subject to Texas franchise-tax reporting, annualized revenue is below $2.65 million, no franchise tax payment is due, and the PIR still has to be filed.
The analysis becomes more important when the LLC is near or above the threshold, has multistate activity, belongs to a combined group, is considering EZ Computation, has prior filing problems or has accounting records that do not clearly support its revenue figures.
AS Consulting Group’s dedicated service page is /texas-franchise-tax/.