The invoice is a hundred and ten days out. The calls go to a voicemail box that is full. Somebody in accounting finally looks the company up, and there it is, in flat capital letters on a state website: FORFEITED.
That is usually the moment the file moves to the write-off pile. The reasoning sounds sensible — the company is dead, the owner is behind a limited-liability shield, nothing left to chase. Nearly everything written about Texas franchise-tax forfeiture is written for the owner who got forfeited. Almost nobody writes it from your side of the invoice.
Under Tex. Tax Code § 171.255(a), when a Texas entity’s privileges are forfeited for failing to file a franchise tax report or pay the tax or penalty, each director or officer is liable for each debt of the entity created or incurred after the date on which that report, tax, or penalty is due and before the privileges are revived. Not the shareholders generally, and not through veil-piercing with its fraud and alter-ego proof problems — a plain statutory exception sitting in the Tax Code, alongside the ordinary rules that govern commercial collection in Texas, that most creditors never look for.
It is not automatic and it does not reach every dollar. But forfeited is the opposite of a dead end.
The free check that comes first
The Texas Comptroller publishes a Franchise Tax Account Status search at comptroller.texas.gov/taxes/franchise/account-status/search. No login, no fee. Search by entity name, taxpayer number, EIN, or Secretary of State file number.
Three things on the result page matter.
“Right to Transact Business in Texas.” The franchise-tax line. If it reads ACTIVE, there is no live forfeiture to work with. Anything else is worth reading closely.
The Secretary of State registration line. A separate field for a reason: it can read differently from the line above. The file number, registered agent, and registered office address sit right there — where a demand or a citation goes.
The officer and director information. Tex. Tax Code § 171.203(a)(3) requires the public information report to give the name, title, and mailing address of each person who is an officer or director of the corporation, limited liability company, or professional association. The statute that creates the liability is fed by the same filing that names the people who might carry it. Those addresses go stale, though, and confirming where someone is now is skip tracing and asset work.
Forfeited, terminated, dissolved — three different things
This is where a good claim gets written off because the worst word seemed to apply. Match the record to the right row.
| What the record shows | What happened | What it means for your claim |
|---|---|---|
| Franchise-tax forfeiture | The Comptroller forfeited the entity’s corporate privileges, or a taxable entity’s right to transact business, under Tex. Tax Code §§ 171.251 and 171.2515. If it does not revive within 120 days, the Secretary of State may forfeit the charter, certificate, or registration under §§ 171.301(1) and 171.309. | § 171.255 liability is in play for debts created or incurred in the window. The entity is denied the right to sue or defend (§ 171.252(1)). Revival does not affect liability already incurred (§ 171.255(d)). |
| Voluntary termination | The owners wound up and filed a certificate of termination, with a Comptroller certificate that all Title 2 taxes have been paid (Tex. Bus. Orgs. Code § 11.101(a), (b)). | No tax forfeiture, so § 171.255 has nothing to attach to. You are in the survival and extinguishment window of §§ 11.356 and 11.359. |
| Involuntary termination by the Secretary of State | Non-tax grounds under Tex. Bus. Orgs. Code § 11.251(b) — an unfiled report, an unpaid fee or penalty, or no registered agent or registered office, uncured within 91 days after notice. | Again no tax forfeiture, so no § 171.255 hook. Same three-year window under §§ 11.356 and 11.359. |
Once the entity is forfeited pursuant to the Tax Code, it is a “terminated entity” under Tex. Bus. Orgs. Code § 11.001(4)(B) unless the forfeiture is set aside, so the three-year clocks in §§ 11.356 and 11.359 start running too. Tax forfeiture is the only one of the three that may hand you a second set of defendants, and also the one that quietly starts a shorter deadline. Both point the same way: move. If the customer has gone silent with no state filing at all, that is a different problem — see the pattern when a company goes dark.
What the statute gives you, and what it costs the debtor
Section 171.255 does two things at once. First, the liability: § 171.255(a) reaches “each debt of the corporation that is created or incurred in this state after the date on which the report, tax, or penalty is due and before the corporate privileges are revived,” and adds that it includes any tax or penalty imposed by the chapter on the corporation that becomes due and payable after the forfeiture.
Second, the measure. Section 171.255(b) is short and heavy: the liability of a director or officer “is in the same manner and to the same extent as if the director or officer were a partner and the corporation were a partnership.” That describes something behaving less like a corporate obligation and more like a personal one — a different question from the business-debt-versus-personal-debt line you normally have to argue.
Meanwhile, § 171.252(1) denies the forfeited entity the right to sue or defend in a court of this state, and § 171.253 bars affirmative relief to it on a pre-forfeiture cause of action unless the privileges are revived. The only carve-out, § 171.254, preserves the privilege to defend a suit to forfeit its own charter. An entity in that posture cannot press a dispute about your invoice without squaring up with the state first.
Everything turns on one date
This is the discipline, and the reason § 171.255 is a lead to investigate rather than a result to assume. The statute does not say “each debt that goes past due after” the report date. It says each debt created or incurred after it. Those are different events, and an invoice can be created long before it is delinquent.
Start with the real due date. The annual report is due before May 16 each year under Tex. Tax Code § 171.202(b), and § 171.202(c) directs the Comptroller to grant a qualifying taxable entity an extension to any date on or before the next November 15 — so confirm the actual date for the delinquent year rather than penciling in May 15.
Then build the account twice: once by the date you performed, the day the goods shipped or the work was done, and once by the date each invoice came due. Lay the report or tax due date across both versions and see what falls on which side.
Where the two disagree, you have a legal question rather than a clerical one. Because § 171.255 puts a company’s debt onto an individual who never signed for it, the scope of “created or incurred” is fought over — renewal notes, payment plans, and forbearances that restate an older obligation most of all. Whether any of them creates a new debt or merely re-papers an old one is a question for a lawyer with the file in front of them.
Sometimes nothing lands inside the window. Better to know that in week one than in month six.
The two defenses they will raise
Section 171.255(c) gives a director or officer exactly two outs, and the statute puts the showing on them. There is no liability for a debt the director or officer shows was created or incurred:
- over the director’s objection; or
- without the director’s knowledge, and that the exercise of reasonable diligence to become acquainted with the affairs of the corporation would not have revealed the intention to create the debt.
Read the second one carefully. It is not “I didn’t know.” It is “I didn’t know and reasonable diligence wouldn’t have told me.” An officer who signed your credit application, approved your purchase orders, or emailed you about the delivery schedule is arguing uphill — which is why the emails, delivery confirmations, and signed acknowledgments are worth pulling before anyone sends a letter.
What about LLC managers and members?
Be careful here, because a lot of published commentary overstates it.
The statutory bridge is solid. Tex. Tax Code § 171.2515(b) provides that the provisions of the subchapter, “including Section 171.255,” that apply to the forfeiture of corporate privileges apply to the forfeiture of a taxable entity’s right to transact business, and § 171.0002(a) lists a limited liability company among the entities included in “taxable entity.”
What the Tax Code does not do is redefine “director or officer” to say “manager” or “member.” Whether a given person at a given LLC occupies that role for § 171.255 purposes is a fact question, and exactly the kind that gets litigated. The Business Organizations Code counterpart, § 11.254(b), uses the broader phrase “governing persons, officers, or agents” — useful, but not the same words. Pull the actual title from the public information report and the certificate of formation, and let counsel take the position.
The clocks already running
| Clock | Length | Source |
|---|---|---|
| Notice before corporate privileges are forfeited | Sent at least 45 days before forfeiture | Tex. Tax Code § 171.256(c) |
| Cure period after that notice | 45 days to file the report or pay the tax and penalty | Tex. Tax Code § 171.251(1), (2) |
| Window to revive before the charter can be forfeited | 120 days after privileges are forfeited | Tex. Tax Code §§ 171.301(1), 171.309(2) |
| Suit on a debt, or on an open or stated account | 4 years from accrual | Tex. Civ. Prac. & Rem. Code § 16.004(a)(3), (c) |
| Claim against a terminated filing entity | Action brought by the third anniversary of termination | Tex. Bus. Orgs. Code §§ 11.356(a), 11.359(a) |
Note what is missing from that table: a deadline to reinstate. Under Tex. Tax Code § 171.313, a stockholder, director, or officer at the time of the forfeiture may ask the Secretary of State to set it aside, and the Secretary shall do so once each delinquent report has been filed and the delinquent tax, penalty, or interest paid. No time limit is stated. A debtor can clean the record up whenever convenient — often the week after your demand letter lands. Which is why § 171.255(d) and Tex. Bus. Orgs. Code § 11.254(b) matter: the cure does not reach backward.
What to do this week
- Run the Franchise Tax Account Status search and save the page, officer and director information included. Free, and dated before anything else you do.
- Find the actual report due date for the delinquent year, including any extension under § 171.202(c).
- Rebuild the account by performance date as well as invoice date, and mark where that tax due date falls on each version.
- Locate the officers. Reported addresses go stale fast; confirming where someone lives and what they hold now is skip tracing, not a Google search.
- Take it to counsel with the documents. Whether a debt was created or incurred inside the window, and whether an individual is a director or officer for § 171.255, have answers only once a lawyer reads the file — which is where legal collections begins.
None of this makes a thin account thick. It stops you from writing off a file because a website used a scary word. A franchise-tax forfeiture opens a statutory exception with names and addresses attached — a very different thing from an empty shell.
Forfeited and gone-quiet entities are ordinary work at ASA, and they turn on the same two things every time: the date, and the names. An account already in the write-off column is not necessarily finished — that is the premise of bad debt recovery work.
General information for commercial creditors, not legal advice. Laws and deadlines change and depend on the facts — confirm specifics with qualified counsel.