What Texas Form 05-359 Is For
Texas Form 05-359 is used to request a Certificate of Account Status from the Texas Comptroller of Public Accounts when a taxable entity plans to end its legal existence or registration in the State of Texas. This certificate serves as official proof that the entity has satisfied all franchise tax and related state tax obligations.
The Texas Secretary of State requires this certificate before processing an administrative dissolution, voluntary termination, or withdrawal of a business entity. Without it, the entity remains active under Texas tax law and continues to incur filing responsibilities, even if business operations have stopped.
This form applies to most taxable entities, including corporations, Texas LLCs, limited liability companies taxed as corporations, limited liability partnerships, professional associations, and foreign entities registered to do business in Texas.
When You’d Use Texas Form 05-359
Texas Form 05-359 is filed when a business owner intends to terminate or withdraw a taxable entity from Texas permanently. It is not used for temporary inactivity, business name changes, or ownership transfers that do not affect legal status.
Situations requiring this form include:
- Voluntary dissolution of a Texas LLC or corporation
- Withdrawal of a foreign entity from the State of Texas
- Administrative dissolution is initiated after compliance issues are resolved
- Termination following a merger where the entity no longer exists
Entities that are not registered with the Texas Secretary of State must still notify the Texas Comptroller in writing of their final business activity date. These entities do not receive a Certificate of Status, but they must still clear all outstanding tax accounts.
Key Rules or Details for 2016
Before filing Texas Form 05-359, the taxable entity must meet all compliance requirements enforced by the Comptroller of Public Accounts. The Comptroller will not issue a tax clearance certificate unless every requirement has been satisfied.
Filing prerequisites
The entity must complete all of the following steps before submitting the request:
- File all required franchise tax reports for every applicable tax year.
- File the correct information report, such as Form 05-102 or Form 05-167.
- Pay all outstanding franchise tax, penalties, and interest.
- Submit a final Franchise Tax Report covering activity through a date within 60 days of termination.
Certificate validity
The Certificate of Account Status issued for termination purposes expires on December 31 of the year it is issued. If it is not filed with the Texas Secretary of State before expiration, a new request must be submitted.
Online filing restrictions
Some entities are unable to use the franchise tax Webfile and must submit a paper request instead. These include:
- Members of combined groups
- Entities under audit or court proceedings
- Entities active for less than one year
- Entities with unresolved tax liability from prior tax years
No tax due threshold
For qualifying entities, annualized total revenue below the applicable threshold may result in reduced reporting requirements. Even if no tax is due, the Franchise Tax Report and tax clearance request must still be filed.
Step-by-Step (High Level)
Step 1: Review tax account status
The business owner should verify that all Texas tax filings are up to date and that no outstanding tax liability exists. This includes franchise tax, sales and use tax, and any other applicable tax reports.
Step 2: File the final Franchise Tax Report
The final report must cover the period from the day after the last annual report ended to within 60 days of the termination date. The report must include any required public information report or ownership information report.
Step 3: Resolve outstanding tax payment issues
Any unpaid tax payment, penalty, or interest must be paid in full before the request is submitted. The Comptroller will not issue a tax clearance certificate until the balances are settled.
Step 4: Submit Texas Form 05-359
Eligible entities may request the certificate electronically using the franchise tax Webfile on a computer or mobile device. Entities required to file by mail must complete the paper form and provide accurate entity information and contact details.
Step 5: Receive the Certificate of Account Status
Once approved, the Comptroller issues the certificate confirming that the entity’s tax accounts are clear. If issues remain, the Comptroller will notify the filer of required corrections.
Step 6: File termination documents with the Texas Secretary of State
The certificate must be submitted along with the appropriate Secretary of State termination or withdrawal forms and the required filing fee to complete the legal termination process.
Common Mistakes and How to Avoid Them
- Requesting Form 05-359 before completing tax reports: File the final Franchise Tax Report and clear any missing reports first so the certificate request is not delayed.
- Miscalculating the final reporting period: Set the final report end date within 60 days of termination to ensure the filing is not rejected due to an invalid period.
- Letting the certificate expire before filing with the Secretary of State: File termination paperwork promptly after the certificate is issued so it remains valid through year-end.
- Filing the wrong information report: Use the correct Public Information Report or Ownership Information Report based on entity type and tax year, so clearance is not delayed.
- Ignoring combined group request rules: Submit a paper request that identifies the reporting entity when combined group rules apply, and avoid electronic filing methods that trigger rejection.
What Happens After You File
If the request is approved electronically, the Certificate of Account Status is issued immediately. Paper filings are reviewed manually and may take several weeks to process.
Once the certificate is filed with the Texas Secretary of State and the termination is approved, the entity’s legal status changes to terminated or withdrawn. At that point, the entity is no longer subject to Texas Franchise Tax or future tax filings.
Business owners should retain copies of all tax filings, certificates, and confirmation records for a minimum of four years. These records may be needed if questions arise related to business debts, property recovery, lost property, or future real estate or court proceedings.
FAQs
Who must file Texas Form 05-359?
Any taxable entity ending its legal existence or registration in Texas must file this form to obtain a Certificate of Account Status.
Is there a filing fee for Form 05-359?
The Texas Comptroller does not charge a filing fee, but the Texas Secretary of State charges separate termination or withdrawal fees.
Does this form replace federal tax filings?
No. Texas Form 05-359 only applies to state tax accounts and does not affect federal tax obligations or federal tax return requirements.
What is the difference between Form 05-359 and Form 05-391?
Form 05-359 is used to terminate an entity, while Form 05-391 is used for reinstatement through a Tax Clearance Letter Request for Reinstatement.
What happens if the form is never filed?
Failure to file keeps the entity active under Texas tax law, leading to ongoing tax filings, penalties, and possible administrative dissolution.
