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 confirms that the entity has satisfied all Texas Franchise Tax obligations and is eligible to close or withdraw formally.
The certificate is required before the Texas Secretary of State will accept a Certificate of Termination or similar filing. It applies to corporations, Texas LLC entities, limited liability companies taxed as corporations, limited liability partnerships, tiered partnerships, real estate entities, and other taxable entities subject to the Texas Franchise Tax under the Texas Tax Code.
When You’d Use Texas Form 05-359
A business owner uses Form 05-359 when permanently closing a business, withdrawing an out-of-state entity from Texas, completing a merger, or converting to a non-taxable entity type. It is also required after administrative dissolution if the entity intends to terminate rather than reinstate formally.
This form is not used for reinstatement. Entities seeking reinstatement after forfeiture must request a Tax Clearance Letter Request for Reinstatement using Form 05-391 and file an Application for Reinstatement instead.
Key Rules or Details for 2023
An entity must be fully compliant with all tax filings before the Comptroller will issue the certificate. This includes filing all required Texas Franchise Tax reports and information reports, as well as completing any outstanding tax payment obligations.
Key requirements include:
- All annual and final franchise tax reports must be filed
- Any No Tax Due Report must still be submitted if the total revenue was below the threshold
- All penalties, interest, and use tax balances must be paid
- Required information reports must be on file
Entities must also file the correct ownership information report. Corporations, Texas LLC entities, professional associations, and financial institutions file Form 05-102, while other taxable entities file Form 05-167.
The certificate is valid only through December 31 of the year it is issued. If it expires, the entity may incur additional filing requirements for the next tax year before a new certificate can be issued.
Step-by-Step (High Level)
Step 1: Determine the final date of business activity
The date on which the entity will cease conducting business in Texas must be specified. The final Texas Franchise Tax Report and associated filings are due on this date.
Step 2: Review filing history and legal status
The organization must verify that all necessary tax returns have been submitted and that its legal status is either active or terminable. Checking for audits, forfeitures, court cases, or unresolved notices should all be part of this review.
Step 3: File required tax and information reports
The entity must submit all outstanding Texas Franchise Tax Reports, along with the report containing the correct ownership information. This is true even if the entity was tax-exempt or did not generate any taxable income.
Step 4: File the final franchise tax report
The final report covers the period from the day after the last annual report through the termination date. It must be filed within 60 days after the entity ceases business in Texas.
Step 5: Request the certificate
When all conditions are met, the entity can submit a paper form 05-359 or use the franchise tax Webfile to request the certificate. Certain entities that have been in operation for less than a year are required to file by mail.
Step 6: File termination documents
After receiving the Certificate of Account Status, the entity must submit it to the Texas Secretary of State with the appropriate Certificate of Termination and any required filing fee.
Common Mistakes and How to Avoid Them
- Requesting the certificate before filing the final Texas Franchise Tax Report: File the final Texas Franchise Tax Report (and any required information reports) first, then ask for the Certificate of Account Status once everything shows as filed and up to date.
- Misunderstanding the 60-day rule: Track the final report due date separately from the annual May 15 deadline; the final report is still required for the final period even if there was no activity.
- Confusing a Certificate of Status with a Certificate of Account Status: Request the Certificate of Account Status from the Comptroller for termination; a Certificate of Status does not meet Texas SOS termination requirements.
- Failing to plan for certificate expiration: Time the certificate request to close at the termination filing, so it remains valid when submitted; if it expires, new filings for the next tax year may be triggered.
What Happens After You File
The Comptroller issues the Certificate of Account Status immediately if the entity files via Webfile and all conditions are met. Paper filings are processed by mail through Comptroller Field Offices and take longer.
The entity's legal status ends or is withdrawn after the Texas Secretary of State receives and approves the certificate. After the end date, you are still responsible for any business debts or tax assessments that were owed before that date. However, you no longer have to file franchise taxes.
Even after ceasing operations, the entity may still be subject to franchise tax obligations if termination is not completed. Penalties, loss of legal status, and future compliance problems may result from this.
FAQs
Who must file Texas Form 05-359?
Any taxable entity ending its existence or Texas registration must file this form, including Texas LLC entities, corporations, tiered partnerships, real estate investment trust entities, and other taxable entities.
Is there a filing fee for Form 05-359?
The Comptroller charges no filing fee for the form itself. Filing fees may apply when submitting termination documents to the Texas Secretary of State.
Can the form be filed online?
Most entities may request the certificate through the franchise tax Webfile. Some entities are required to submit a paper form due to restrictions on their entity type or account status.
What if the entity had no revenue in its final period?
A final report is still required, even if the total revenue was zero. A No Tax Due Report may be filed if the entity qualifies.
What happens if the certificate expires?
If the certificate expires before termination is filed, the entity may need to satisfy new tax year filing requirements before requesting another certificate.
