What Texas Form 05-359 (2018) Is For
When a business entity wants to withdraw its registration in the State of Texas or end its legal existence, it must submit Texas Form 05-359 to the Texas Comptroller of Public Accounts for a Texas Certificate of Account Status. By attesting to the satisfaction of all franchise taxes and other relevant tax obligations, this certificate acts as tax clearance.
Before permitting the majority of taxable entities to finish filing for termination, withdrawal, cancellation, or merger, the Texas Secretary of State requires this certificate. Under Texas state tax laws, a business entity cannot legally change its legal status or terminate its registration without an approved certificate of account status.
This form applies to trusts, professional associations, corporations, Texas LLC entities, limited liability partnerships, and other taxable entities, including corporations subject to corporate taxes. Depending on their tax history and legal status, both foreign and domestic entities registered in Texas may be required to file Form 05-359.
When You’d Use Texas Form 05-359
When a business owner in Texas is about to stop doing business or has already stopped, they must complete Form 05-359 to obtain official tax clearance before closing the business. The form is filed after all required tax reports have been submitted and all tax payments have been made.
Late filing situations arise when an entity ceased operations in a prior tax year but failed to file a final Texas Franchise Tax Report. In these cases, all missing tax reports must be filed, and any outstanding business debts, penalties, and interest must be paid before the Texas Comptroller’s office will issue the certificate.
There is no amended version of Form 05-359. However, amended tax returns or amended franchise tax reports may be filed if errors are discovered that affect total revenue or tax liability before requesting the certificate.
Key Rules or Details for 2018
The final Texas Franchise Tax Report must be filed no later than 60 days after the entity ceases doing business in Texas. The accounting period must begin the day after the last annual report ended and end within that 60-day window.
The Texas Certificate of Account Status is only valid through December 31 of the year it is issued. If termination documents are not filed with the Texas Secretary of State before that date, the entity may need to file another Texas Franchise Tax Report for the following tax year.
Certain entities are exempt from using the franchise tax Webfile for online submission. Combined reporting group members, entities active less than one year, entities under audit, and some limited liability partnerships must submit a physical copy of Form 05-359 by mail.
Step-by-Step (High Level)
Step 1: File all required tax reports
All outstanding Texas franchise tax reports must be filed by the entity, including any long form filings (such as Form 05-163) that may be necessary, depending on the reporting method and total revenue.
Step 2: Resolve all tax payments
All franchise taxes, sales and use tax balances, and other amounts due under the Texas Tax Code must be paid in full before proceeding.
Step 3: File the final franchise tax report
The final report needs to be explicitly identified as a final filing and cover the brief tax year that ends within 60 days of the last business activity.
Step 4: Submit the appropriate information report
The entity must file the required information report, such as Form 05-391, along with the final tax return.
Step 5: Submit Form 05-359
Some businesses can obtain the certificate by submitting an electronic document through the franchise tax Webfile, while others must submit a paper form.
Step 6: Receive the certificate
If approved, the Texas Comptroller’s office issues the Texas Certificate of Account Status as a downloadable electronic document or a mailed physical copy.
Step 7: File termination documents
Before the certificate expires, it must be delivered to the Texas Secretary of State together with the required termination or withdrawal filing fee.
Common Mistakes and How to Avoid Them
- Requesting the certificate before all tax obligations are resolved: Review the account for missing reports or unpaid balances so penalties or overlooked filings do not delay clearance.
- Miscalculating the final reporting period: Determine the correct final period under Texas franchise tax rules rather than assuming it aligns with the calendar year.
- Overlooking required information reports: File Form 05-391 and any other required reports so the Comptroller can issue the certificate.
- Attempting online submission when Webfile is not allowed: Confirm Webfile eligibility before submitting, and use mail filing when online submission is not permitted.
- Missing the December 31 certificate expiration date: Request the certificate early and file termination paperwork before the end of the year so the process does not need to be restarted.
What Happens After You File
If the request is submitted through the franchise tax Webfile and the account is in good standing, the certificate is issued immediately as a PDF editing-ready electronic document. The entity can then submit it to the Texas Secretary of State without delay.
Paper submissions require additional processing time. If all the requirements are met, the Texas Comptroller of Public Accounts reviews the request and sends the certificate by mail. If not, the entity is contacted to determine if further action is required.
Once the termination is complete, the entity's legal status is changed in state records. Entities based in the United States are listed as terminated, while entities based outside the country are listed as having left the State of Texas.
FAQs
Who must file Texas Form 05-359?
Any taxable entity required to obtain tax clearance before termination or withdrawal must file Form 05-359.
Is there a filing fee for Form 05-359?
The Texas Comptroller charges no filing fee, but separate filing fees apply when submitting termination documents to the Texas Secretary of State.
Can a Texas LLC file Form 05-359 online?
Most Texas LLC entities can request the certificate through the franchise tax Webfile, unless they fall into an ineligible category.
What if the business never registered with the Texas Secretary of State?
The entity must still notify the Texas Comptroller’s office in writing and submit a final tax return and Form 05-359 by mail.
How long does it take to receive the certificate?
Online requests are typically processed immediately, while mailed submissions may take several weeks to be processed.
Does federal tax compliance affect approval?
Federal tax compliance does not directly affect issuance, but all state-level tax obligations must be satisfied.
Can overpayments be refunded after filing?
Refunds may be requested through amended tax reports if the overpayment meets state refund requirements.
