Summary of What This Blog Covers
- Why LLCs lose status – Missed filings or agent issues can cause forfeiture.
- What’s at risk – Inactive LLCs lose legal protection and access to key business tools.
- How to fix it – File back taxes, get a clearance letter, and submit Form 801.
- How we help – Insogna handles reinstatement and keeps you compliant.
You’re running a business. That means your focus is on growth, customers, deliverables, and maybe even your next funding round. The last thing you’re thinking about is whether your Texas LLC is in good standing with the state.
Until one day, you try to do something routine: open a bank account, sign a new client contract, file taxes, or apply for a business loan; and you’re met with a red flag: your LLC has been forfeited or flagged as inactive by the state of Texas.
And just like that, the panic sets in.
At Insogna, a top-rated Austin, Texas CPA firm with decades of experience supporting entrepreneurs, we see this happen more often than you’d think. Most business owners don’t even know they’ve lost good standing until they need it.
The good news? It’s fixable. And faster than you think if you know what to do.
So let’s break it down: why this happens, how to reinstate your Texas LLC, and how a proactive partnership with a certified public accountant near you can make reinstatement one of the easiest wins for your business this year.
What Does “Good Standing” Actually Mean for Your LLC?
Good standing isn’t just a label, it’s your business’s official permission slip to operate in the state. It means you’ve:
- Filed all required reports (including franchise tax filings)
- Paid applicable taxes
- Maintained a registered agent
- Met any other Secretary of State requirements
When your LLC is in good standing, it has full legal rights to conduct business. That includes signing contracts, opening bank accounts, accessing loans, and protecting you from personal liability.
But when your business falls out of good standing?
- Your LLC can’t legally operate in Texas.
- You lose limited liability protection.
- You’re cut off from financial institutions and lending platforms.
- Any contract you sign could be legally challenged.
Which means this isn’t just red tape. It’s a red alert.
How Texas LLCs Lose Good Standing (And Why It’s So Easy to Miss)
Texas makes it fairly simple to stay compliant but the simplicity is deceiving. Many business owners lose their LLC status without realizing it because they assume “no tax due” means “nothing to file.”
Here are the most common reasons a Texas LLC falls out of good standing:
1. Failure to File the Annual Franchise Tax Report
Every year, the Texas Comptroller of Public Accounts expects a franchise tax filing. Even if you owe no franchise taxes (which is often the case for early-stage businesses), you still must submit a report.
If you don’t file by the deadline (usually May 15), the state begins the process of forfeiting your LLC’s privileges. Eventually, they’ll issue a forfeiture notice and your business becomes inactive.
Key takeaway: “No tax due” is not the same as “nothing due.”
2. Not Maintaining a Registered Agent
Texas law requires every LLC to have a registered agent who is authorized to receive legal documents. If your registered agent resigns or the information on file becomes outdated and you don’t update it, your LLC can be flagged as non-compliant.
A surprising number of business owners use themselves or a third-party friend as the registered agent and forget to update the details after a move or organizational change.
Pro tip: Use a professional registered agent service to ensure year-round reliability.
3. Ignoring State Notices or Missing Filing Windows
The state doesn’t suspend your LLC without warning. They’ll usually send a notice by mail or email. But if that notice is sent to an outdated address or ignored, your window to fix the issue quietly closes.
Once you’re forfeited, the process becomes more complicated and more expensive.
Insogna solution: We monitor these notices for our clients as part of our compliance services, helping you stay ahead of reinstatement risks.
What Happens When Your LLC Is Inactive?
The consequences of losing your good standing are real and immediate.
Legal Exposure Increases
The moment your LLC status is forfeited, your limited liability protection is gone. That means if your business is sued or incurs debt, your personal assets including your home and personal bank accounts may be at risk.
Your Business Operations Stall
Without good standing, your business can’t:
- Open or maintain a bank account
- Apply for or renew loans
- Bid on government contracts
- Legally enforce contracts
You are, for all practical purposes, locked out of growth opportunities.
Penalties Pile Up
If you let the problem sit, the state doesn’t just wait quietly. They keep the meter running. You’ll incur penalties, interest, and in some cases, late fees from your vendors, lenders, or banks due to inactive status.
Bottom line: Time is money and nowhere is that more true than with a forfeited LLC.
Step-by-Step: How to Reinstate Your Texas LLC
Reinstating your LLC doesn’t have to be a bureaucratic nightmare. But you must follow the process exactly. That’s where working with a tax consultant near you who understands Texas-specific compliance can be a game-changer.
Step 1: Get a Tax Clearance Letter from the Texas Comptroller
The first step in reinstating your LLC is proving that you’re current on all franchise tax obligations. That means requesting a Tax Clearance Letter (Form 05-391) from the Comptroller.
Here’s how it works:
- We identify which franchise tax reports you’ve missed.
- We file them retroactively if necessary.
- We pay off any outstanding balances.
- We request the Tax Clearance Letter once your account is clean.
Why it matters: Without this letter, the Secretary of State will reject your reinstatement application.
Step 2: Submit the Application for Reinstatement
With your Tax Clearance Letter in hand, you’ll file Form 801: Application for Reinstatement with the Texas Secretary of State.
This form must include:
- The name of your business entity
- The Tax Clearance Letter
- A statement confirming your registered agent is still valid (or updated if necessary)
At Insogna, we:
- Complete and file Form 801 for you
- Ensure all documentation is accurate and up to date
- Resolve any state inquiries or follow-ups
This ensures there are no delays or rejections and gets your business back in good standing quickly.
Step 3: Confirm Your Reinstatement and Resume Business
Once your application is processed and approved, your LLC will be marked as “active” again on the Texas Secretary of State’s website.
We verify the status change for you, download your updated certificate, and provide a post-reinstatement compliance checklist so you stay on track moving forward.
Key reminder: Reinstatement is not the end, it’s the reset. Our ongoing services help you stay compliant, year after year.
What About Multi-State and Federal Issues?
Reinstating your Texas LLC is critical but it’s just one piece of a larger compliance puzzle. If your business has operations, customers, or contractors in other states or countries, additional steps may be required.
Multi-State Compliance
Did your business register as a “foreign LLC” in other states? If so, they may need to be notified of your Texas reinstatement. Otherwise, they may classify your business as suspended across multiple jurisdictions.
FBAR Filing for International Accounts
If your LLC or business entity controls $10,000 or more in non-U.S. financial accounts (even for a single day), you must file an FBAR (Foreign Bank Account Report) with the U.S. Treasury.
Failure to file can result in severe penalties, including fines of $10,000 or more per account.
At Insogna, we check every client’s compliance across federal and multi-state requirements, including:
- Foreign asset disclosures
- Nexus and economic thresholds in other states
- Sales tax collection obligations
Why Insogna is the Right Partner for Your Reinstatement
You can try to go it alone, Google your way through state forms, and hope nothing gets missed. Or you can work with a team of certified professional accountants, tax advisors near you, and real people who know exactly how to reinstate your Texas LLC because we’ve done it hundreds of times.
We’re more than a tax preparer near you. We’re your compliance partner, your strategist, your peace of mind.
We offer:
- Personalized support
- End-to-end reinstatement management
- Proactive planning to prevent future issues
- Ongoing CPA services that grow with your business
Whether you’re a solopreneur, a multi-entity owner, or a scaling digital brand, our Austin CPA firm has the insight and systems to protect your business for the long haul.
Final Word: Reinstatement Isn’t Just a Fix, It’s a Fresh Start
If your LLC is inactive or forfeited, you’re not alone and you’re not stuck. With a clear plan, expert support, and strategic guidance, you can be back in business in days.
More importantly, you can build a business that stays protected moving forward.
Ready to reinstate your Texas LLC and take control of your compliance?
Let’s make it happen. Schedule your consultation with Insogna today, Austin’s most trusted partner for tax, compliance, and strategic growth.
Because great businesses don’t just file taxes. They build systems. And that starts right here.