Texas Business Lawyer

If you are one of the 200,000 businesses that have yet to pay franchise tax, then it is time to get prepared. You will be required to pay franchise tax if you have registered your business as a limited partnership. The trouble with the franchise tax as with any new tax is that many people have claimed to be unaware of its existence. The $3.4 billion that the franchise tax is expected to generate each year will be used to bring property tax relief to local schools.

Your tax obligation can be calculated differently depending on your annual revenue. For businesses that have under $10 million in total annual revenue, a fixed formula can be used or they can choose to pay tax on their margin. Businesses with over $10 million are required to pay tax on their margin. Calculating the tax that you owe is a relatively simple process that your business attorney will be able to walk you through.

There are three methods for calculating tax on your margin. The tax that you are obliged to pay is the lowest one. Your margin is determined to be either your total revenue less goods sold, total revenue less compensation, or a flat 70 percent of your total revenue. Once you have calculated your margin, you can then calculate your tax. If you are a wholesaler or retailer, your tax rate is 0.5 percent. Everyone else pays 1 percent.

All businesses to which the franchise tax applies are required to file a tax report but they may not be required to pay tax. If your total revenue is less than $434,782 or your tax obligation is less than $1,000, you will not have to pay. With the first expansion of the franchise tax law due to take effect beginning January 1 and a first filing deadline of May 15, now is the perfect time to start your preparations.

If you face potential problems with your business because of business issues, contact the Texas business lawyers at Slater & Kennon for an initial consultation.