Find out why termination is not always a bad thing.
How does an entity enter delinquency status?
In 2024, the state of Texas eliminated the No Tax Due report for franchise tax. This led to many business owners failing to file their required annual Public Information Report. If this annual report is not filed, the Comptroller will send out an intent to forfeit notice. One of the following is the reason for this notice:
- Failure to file franchise tax returns
- Failure to pay franchise tax due to the Texas Comptroller
- Failure to file the annual Public Information Report (PIR) or Owner Information Report (OIR)
The Change to Forfeited Status
If the reports are not filed or taxes are left unpaid after the notice is sent, the status of the LLC is updated to forfeited. This status means your Texas LLC is no longer is in good standing with the state and has lost its liability protection. Legally the entity still exists, but it has lost the liability protections such as the following:
- right to sue or defend in a court of this state
- directors or officers of the LLC are liable for a debt of the corporation
To get back in good standing, the LLC must file any delinquent franchise tax returns, pay any penalties and late fees, and file the Public Information Reports.
Involuntary Termination and Reinstatement
A Texas LLC is involuntarily terminated after the Secretary of State administratively ends the entity. This occurs after the forfeiture is not resolved.
To get an LLC back in good standing after getting involuntarily terminated by the Secretary of State, the process is called reinstatement. The entity must request a Tax Clearance Letter from the Texas Comptroller. The Comptroller will confirm whether the LLC has paid all taxes and fees and all tax returns are filed and current. A request to set aside the tax forfeiture is then filed with the Secretary of State along with the Tax Clearance Letter to get back in good standing. The filing fee is $75.00.
Voluntary Termination and Closed LLC
The confusion among some business owners is the term termination. The process to close or dissolve an LLC is called termination but this termination is voluntary and initiated by the business owner unlike the involuntary termination following forfeiture.
If a business owner wants to dissolve or close their LLC in Texas, they must request a Certificate of Account Status with the Comptroller. The Comptroller will certify that all taxes are paid and all state tax returns are filed. Once the certificate is received, the LLC must file a certificate to terminate the LLC with the Secretary of State. The certificate of termination request has to state why the LLC is being dissolved. The application will be rejected if this is not included. The filing fee for the certificate of termination is $40.00.
Below is a summary of the actions needed for each step listed above.
| Status | Action Needed | Resulting Status |
| Forfeited LLC | Pay Fees/File Franchise Tax Returns/File Public Information Report | Active |
| Involuntarily Terminated LLC | Request Tax Clearance Letter/File to Set Aside Forfeiture | Active |
| Terminate/Dissolve/ Close LLC | Request Certificate of Account Status/File Certificate of Termination | Franchise Tax Ended |
Next Steps: How to Resolve Your Texas LLC Status
Whether you need to revive your forfeited business or cleanly shut down an inactive entity, resolving your status with the State of Texas requires a specific multi-step administrative process.
- Step 1: Account Audit & Delinquency Review – Review your Texas Comptroller WebFile ledger to identify all unfiled Franchise Tax Reports, Public Information Reports (PIR), and outstanding statutory late fees.
- Step 2: File All Past-Due Reports – Prepare and submit all missing annual franchise tax filings up through the current report year (or final report year for dissolutions).
- Step 3: Secure Your Official State Tax Clearance
- To Reinstate: Request Form 05-377 (Tax Clearance Letter for Reinstatement).
- To Terminate: Request Form 05-359 (Certificate of Account Status for Termination).
- Step 4: Submit Final Filings to the Texas Secretary of State – File your tax clearance document with the Secretary of State along with Form 801 (Application for Reinstatement) or Form 651 (Certificate of Termination).
Closed or Terminated LLC FAQ
Can I dissolve a Texas LLC that is already forfeited?
No. The Texas Secretary of State rejects termination filings for forfeited entities. You must first resolve all back franchise tax reports, pay any penalties with the Comptroller, and secure Form 05-359 (Tax Clearance Letter) before filing your Certificate of Termination.
What is the difference between “Inactive/Forfeited” and “Forfeited Existence”?
“Inactive/Forfeited” is a Comptroller status meaning your tax reports are delinquent and your right to transact business or use Texas courts is suspended. “Forfeited Existence” is a Secretary of State action that happens roughly 120 days later, officially dissolving the legal charter and exposing owners to personal liability.
Why shouldn’t I just abandon my LLC and let the state shut it down?
Under Texas Tax Code § 171.255, once an entity is forfeited, directors and officers can be held personally liable for debts, taxes, and penalties incurred during forfeiture. The Comptroller also keeps the unfiled reports and late penalties permanently attached to the organizers.
What does “Franchise Tax Ended” mean on the Comptroller website?
It means the active franchise tax account has been closed. This occurs when the business completed a formal dissolution.
Who issues the Tax Clearance Letter?
The Texas Comptroller issues the Tax Clearance Letter (Form 05-377), not the Secretary of State. Once the Comptroller verifies all back returns and fees are satisfied, you submit that certificate to the Secretary of State alongside your reinstatement forms.
If you file bankruptcy on a Texas business LLC, will it show up on the Texas Secretary of State website?
No. Bankruptcy is governed entirely by federal law and handled through the U.S. Bankruptcy Courts, not state filing offices. The Texas Secretary of State does not track, receive, or display federal bankruptcy filings or automatic stays on its entity search portal.
Need Help Resolving Your Texas Entity Status?
Navigating past due franchise tax reports, statutory forfeiture penalties, and state clearance letters can be time consuming and detailed process. Any missed step can derail a property sale, delay a closing, or leave your business stuck in administrative limbo for weeks.
I handle the entire administrative process from start to finish beginning with auditing your Comptroller ledger, preparing required back filings, obtaining your official tax clearance letter, and filing with the Secretary of State so you can regain good standing or cleanly close out your business records.
(Note: I provide administrative tax compliance and state filing services. I do not provide legal advice or internal dispute resolution.)
Request an Entity Status Review
Submit your entity details through the secure intake form for a direct review by a Texas CPA. Andris Financial Services examines public state records and emails a diagnostic breakdown of missing filings along with a flat fee proposal the same business day!
Visit the Texas Comptroller to view your account status.