How to Keep Your LLC in Good Standing in TexasOct 12, 2022
What is “Good Standing"?
Generally speaking, “Good Standing” is when an entity has its tax filings and fees up to date with the Comptroller of Public Accounts, the entity’s registered agent current with the Texas Secretary of State, and all fees and reports paid and filed with the secretary of state. Two of the most common documents needed annually to maintain Good Standing are a Public Information Report (PIR) to be filed with the secretary of state, and an Annual Franchise Tax Report to be filed with the Comptroller of Public Accounts. Conveniently, both documents can easily be filed online through the respective government agency’s web portals.
How do you know if your entity is in Good Standing?
There are two simple ways to check if your entity is in good standing. For $1.00, you can search the business filings of the Secretary of State, and it will tell you if the entity is active or not. A second, and free, method is to search the Comptroller for the tax status of the entity, and it will tell you if it is active or not. However, the Comptroller of Public Accounts only checks if the entity’s tax status is current.
What are common ways to lose Good Standing?
Failing to file the above annual reports with the Comptroller and Secretary of State. Failing to maintain a registered agent or registered office with the Secretary of State. Failing to timely file and pay franchise taxes with the Comptroller of Public Accounts. Additionally, missing deadlines for the above filings or filing incorrect or incomplete paperwork will result in the loss of Good Standing, and sometimes if the business or the owner commits criminal acts the entity will lose Good Standing status.
What happens if my entity is not in Good Standing?
If your entity loses Good Standing the Secretary of State will cause your entity to be inactive and then ultimately terminate your entity, most commonly for tax forfeiture. In addition, not being in Good Standing will cause issues obtaining financing for your business, opening bank accounts, selling your business, and registering your business to transact business in other states.
What to do if you are not in Good Standing?
The good news is that it is relatively simple to recover your Good Standing, if you catch it early. Generally, all that is required is to file the correct paperwork and pay any late fees and your entity will be restored to Good Standing. If your entity has been terminated due to a tax forfeiture, this process becomes much more complicated.
If your entity has been terminated by the secretary of state due to a tax forfeiture, you must now apply to reinstate your entity with the Texas Secretary of State. To do this it will require an Application for Reinstatement and Request to Set Aside Tax Forfeiture (Form 801, not Form 811). This form requires a Letter of Good Standing from the Texas Comptroller of Public Accounts. To obtain this letter you must file and pay all outstanding taxes and fees with the Comptroller, and then request the letter. Once the letter is provided it can be filed along with Form 801 to reinstate your entity. However, the letter is only good for a certain period of time, so this entire process is time sensitive. As you can see, there are various moving parts in this process and can become quite a headache if you are attempting to navigate it alone, while still running your business.
Should you consult a lawyer for any of this?
If you have simply missed a deadline or forgotten to pay a fee, a lawyer probably is not necessary to help you solve your issue. A phone call to the secretary of state or to the Comptroller of Public Accounts can usually answer all your pertinent questions. However, if your entity has been terminated due to a tax forfeiture, it is wise to consult an attorney to ensure your entity is correctly, and timely, reinstated.
Written By: Connor McQuage