Avoiding Franchise Tax

The Corporate Franchise Tax: Is there a way around it?

 

There is a way to eliminate the franchise tax in the State of Texas on an entity taxed as a corporation at the federal and state level.

 

If an entity is a corporation or a limited liability company in Texas, the entity can adopt a plan of conversion and restructure its organization so that its business is done by another type of entity such as a limited partnership. This type of conversion is authorized by the Texas Business Corporation Act, the Texas Limited Liability Company Act, the Texas Revised Limited Partnership Act, and the Texas Revised Partnership Act.

 

The conversion can effectively eliminate the franchise tax at the state level while not incurring any tax at the federal level from the conversion. Another added benefit is that after the conversion, the old corporation.

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