What Texas Form 05-359 (2014) 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 terminate its legal existence or registration in the State of Texas. This certificate confirms that the entity has satisfied all franchise tax and related tax obligations administered under the Texas Tax Code.
The Certificate of Account Status is often referred to as a tax clearance certificate or tax clearance letter. It is a mandatory requirement that the Texas Secretary of State must approve before terminating, withdrawing, or administratively dissolving filings for most taxable entities, including Texas LLC entities, limited partnerships, limited liability partnerships, and entities taxed as corporations.
When You’d Use Texas Form 05-359 (2014)
A business owner would use Form 05-359 when the entity intends to end its legal status in Texas or withdraw its authority to do business in the state. This applies to both domestic entities formed in Texas and foreign entities registered to operate in Texas.
Voluntary dissolution, mergers in which the entity does not survive, the withdrawal of a foreign entity, and the termination of business operations that result in administrative dissolution are examples of typical circumstances. The form must be obtained after all required tax reports and tax payment obligations have been fulfilled, and it must be obtained before filing termination documents with the Texas Secretary of State.
Key Rules or Details for 2014
Several vital rules govern the operation of Form 05-359 and the issuance of the Certificate of Account Status. The certificate is valid only through December 31 of the year it is issued, regardless of the beginning date or tax year in which it is issued. If termination is not completed by year-end, a new request must be submitted.
The Texas Comptroller will only issue the certificate if the entity’s Franchise Tax Account Status reflects good standing. This requires that all Franchise Tax Reports, public information report filings, ownership information report filings, and any other required tax reports be filed. All franchise tax, sales tax, use tax, and other applicable tax liabilities must be paid in full, including penalties and interest.
Certain entities are unable to request the certificate through the Franchise Tax Webfile and must submit a paper form instead. These include members of a combined reporting group, businesses that have been open for less than a year, registered limited liability partnerships, companies undergoing an audit, real estate investment trusts, and businesses with unresolved tax issues dating back many years. Most of the time, nonprofit organizations that are exempt from taxes don't need to get this certificate to end their business.
Step-by-Step (High Level)
Step 1: Complete internal wind-up requirements
The entity should obtain required approvals, resolve business debts, and address any pending court matters. These steps should be completed before requesting tax clearance.
Step 2: File all required Texas franchise tax reports
File all delinquent franchise tax reports and submit the required public information report or ownership information report (such as Form 05-102 or Form 05-167). File the final franchise tax report using the correct method (E-Z Computation, COGS, or Compensation Deduction).
Step 3: Pay all taxes due
Pay any required franchise tax amounts and resolve any remaining balances. Confirm payments are posted to avoid clearance delays.
Step 4: Request the Certificate of Account Status using Form 05-359
Submit Form 05-359 after compliance is complete, using the electronic option if eligible or mailing the paper form when required. Keep proof of submission and any confirmation received.
Step 5: File termination with the Secretary of State
Attach the issued Certificate of Account Status to the termination filing sent to the Texas Secretary of State and pay the required filing fee. Retain copies of the certificate, filing receipt, and related tax records after approval.
Common Mistakes and How to Avoid Them
- Requesting the certificate before all required reports are filed: File every Franchise Tax Report and the necessary public information report first, so the Comptroller does not deny the request.
- Missing the December 31 validity deadline: Complete the Secretary of State termination filing before December 31 or request a new Form 05-359 certificate if the prior one expires.
- Using the wrong document for termination: Submit the Certificate of Account Status issued through Form 05-359 rather than a general Certificate of Status or an account printout.
- Using the wrong submission method: Confirm whether paper filing is required before submitting, so an ineligible online filing attempt does not delay the request.
- Signing termination documents incorrectly: Ensure the correct authorized signatory signs, based on the entity type (officer, authorized member/manager, or general partner), to avoid rejection.
What Happens After You File
The method used determines how long it takes to process Form 05-359 after it is submitted. When an online request meets all requirements, the Certificate of Account Status is typically issued immediately. During busy times around May 15, it could take a few business days or more to submit a paper.
Once the certificate is issued, the entity must complete termination filings with the Texas Secretary of State. After approval, the entity’s legal status changes to terminated or withdrawn. The entity can no longer conduct business in Texas under its prior legal status.
Even after termination, certain obligations may remain. Business records should be retained, federal tax obligations may still apply, and tax accounts may remain subject to review for prior periods. Refunds for overpaid franchise tax may be requested after closure.
FAQs
Who must file Texas Form 05-359?
Most taxable entities that terminate or withdraw from Texas are required to file Form 05-359. This includes limited liability companies, limited partnership companies, and entities taxed as corporations.
Is Form 05-359 required for administrative dissolution?
Yes, in most cases, a Certificate of Account Status is required to finalize termination, even when the entity is subject to administrative dissolution.
Does Form 05-359 replace termination filings with the Texas Secretary of State?
No, the certificate only satisfies the tax clearance requirement. Separate termination documents must still be filed with the Texas Secretary of State, along with the applicable filing fee.
Can the certificate be used for reinstatement purposes?
No, reinstatement generally requires a Tax Clearance Letter Request for Reinstatement and may involve Form 05-391 rather than Form 05-359.
Does this certificate affect federal tax obligations?
No, the Certificate of Account Status applies only to Texas tax obligations and does not affect federal tax filing or payment requirements.
