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. This certificate confirms that a taxable entity has satisfied all Texas Franchise Tax and related tax obligations required under the Texas Tax Code. It functions as a formal tax clearance certificate for entities ending their legal presence in the State of Texas.
The Certificate of Account Status is required before the Texas Secretary of State will accept a certificate of termination, withdrawal, or dissolution. Without this certificate, an entity’s legal status remains active, and ongoing tax reports, tax liability, and administrative dissolution risks continue to apply. The Comptroller of Public Accounts reviews all tax filings, franchise tax returns, and tax payment history before issuing the certificate.
Entities commonly required to file Form 05-359 include corporations, limited liability companies, limited liability partnerships, professional associations, and other entities taxed as corporations. Nonprofit entities with exempt status generally do not need to complete this form because they are exempt from the Texas Franchise Tax.
When You’d Use Texas Form 05-359
Texas Form 05-359 is used when a taxable entity needs a Certificate of Account Status from the Texas Comptroller of Public Accounts before ending its legal presence in the State of Texas. This commonly happens when a business owner is closing a Texas LLC, dissolving a corporation, or withdrawing an out-of-state entity that is registered with the Texas Secretary of State.
The form is typically submitted after all Franchise Tax Report requirements are met, including any final tax reports and any remaining tax payment needed to bring the account to zero. It also applies in late situations where prior tax filings were missed and tax liability continued to accrue, as well as in amended situations where corrected tax reports must be processed before a tax clearance certificate can be issued.
Key Rules or Details for 2024
The Texas Comptroller will not issue a Certificate of Account Status until all tax accounts show compliance. This includes filing all required franchise tax returns, sales and use tax reports, and any other tax reports administered by the Comptroller of Public Accounts.
The certificate issued in response to Form 05-359 expires on December 31 of the year it is issued. If termination documents are not filed with the Texas Secretary of State before that date, a new certificate must be requested, which may require additional tax filings for the new tax year.
Certain entities are exempt from using the franchise tax Webfile to request the certificate and must submit Form 05-359 by mail instead. These entities include combined groups, entities under audit, limited liability partnerships, and entities that were administratively dissolved before January 1, 2000.
Step-by-Step (High Level)
Step 1: Complete the Winding Up Process
The organization needs to settle its business debts, distribute its remaining assets, and comply with the rules outlined in its governing documents or operating agreement. The winding-up process is a legal requirement that must be followed before terminating someone's employment.
Step 2: File All Outstanding Tax Filings
All tax returns, reports, and other filings for franchises must be submitted using the correct method. This includes any applicable taxes in Texas, such as sales tax and use tax, among others.
Step 3: File the Final Franchise Tax Report
The final Franchise Tax Report covers the period from the end of the last tax year through the termination date. This report must accurately reflect total revenue and any remaining tax liability.
Step 4: Submit Form 05-359
If applicable, Form 05-359 can be submitted online through the Franchise Tax Webfile; otherwise, it must be mailed. The Texas Comptroller of Public Accounts reviews the entity's tax accounts and franchise tax account status.
Step 5: File Termination Documents
The entity files Form 651 or other relevant termination forms with the Texas Secretary of State following receipt of the Certificate of Account Status. The submission must include the necessary filing fee.
Common Mistakes and How to Avoid Them
- Failing to file the final Franchise Tax Report: Submit the required final Franchise Tax Report when operations end; annual franchise tax filings do not replace the final report tied to termination.
- Using an online status printout instead of the official Certificate of Account Status: Request the official Certificate of Account Status by filing Form 05-359; online status screens or printouts are not accepted for termination.
- Avoid timing mistakes with the certificate request by requesting the certificate close enough to the termination filing to remain valid, but not before all required reports have been accepted and filed. This helps prevent end-of-year delays that increase the risk of expiration.
- Overlooking combined group filing rules: If part of a combined group, submit Form 05-359 by mail and coordinate with the Comptroller as needed to confirm all group-level requirements are satisfied.
What Happens After You File
When Texas Form 05-359 is submitted through the franchise tax Webfile and all requirements are met, the Texas Comptroller issues the Certificate of Account Status immediately. Mail submissions require manual review and may take several weeks, particularly if tax reports or tax payments need verification.
The entity's legal status in the State of Texas formally ends when the certificate and the certificate of termination are submitted to the Texas Secretary of State. Franchise tax filing responsibilities cease, but business activity and tax filing records are kept on file for future use.
FAQs
Who must file Texas Form 05-359?
Most taxable entities registered in the State of Texas, including Texas LLCs, corporations, and limited liability partnerships, must file Form 05-359 before terminating or withdrawing.
Is there a filing fee for Form 05-359?
The Texas Comptroller does not charge a filing fee for Form 05-359, but termination filings with the Texas Secretary of State do require a filing fee.
Can Form 05-359 be filed online?
Many entities can request the certificate through the franchise tax Webfile, but some entities must submit the form by mail due to reporting restrictions.
What if the entity has unpaid taxes?
The Certificate of Account Status will not be issued until all tax liability, penalties, and interest are paid in full.
Is this process the same as in other states?
No, procedures vary by state, and requirements for termination in Texas differ from those used by agencies such as the California Secretary of State.
