Entities Subject to Franchise Tax
Each taxable entity formed in Texas or doing business in Texas must file and pay
franchise tax. These entities include:
- Corporations
- limited liability companies (LLCs), including series LLCs
- Banks
- State limited banking associations
- Savings and loan associations
- S corporations
- Professional corporations
- Partnerships (general, limited and limited liability)
- Trusts
- Professional associations
- Business associations
- Joint ventures
- Other legal entities
Entities Not Subject to Franchise Tax
The following entities do not file or pay franchise tax:
- Sole proprietorships (except for single member LLCs)
- General partnerships when direct ownership is composed entirely of natural persons (except for limited liability partnerships)
- Entities exempt under Tax Code Chapter 171, Subchapter B
- Certain unincorporated passive entities
- Certain grantor trusts, estates of natural persons and escrows
- Real estate mortgage investment conduits and certain qualified real estate investment trusts
- A nonprofit self-insurance trust created under Insurance Code Chapter 2212
- A trust qualified under Internal Revenue Code Section 401(a)
- A trust exempt under Internal Revenue Code Section 501(c)(9); or
- Unincorporated political committees