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Forming a New Business
The purpose of this article and the accompanying presentation by the authors is to present a high-level overview of legal considerations involved in counseling clients forming a new business. In an attempt to be clear and truly fundamental, we have assumed that the reader or listener has little or no prior knowledge of the laws in this area. The topics covered consist of a description of types of entities, ethical considerations, fundamental tax considerations,choice of jurisdiction, securities laws and choice of entity. Each of these topics could be the subject of a longer, in-depth article or a whole program and indeed whole books and whole programs have been written and sponsored on almost all of these topics. It is our hope that these materials will provide a useful introduction and we have attempted to include footnotes with references to more in-depth materials for the practitioner wishing to take a deeper dive. At the end of the article, we have provided lists of documents a lawyer would need to prepare to form a general partnership,a for-profit corporation, a limited partnership and a limited liability company under Texas law. While it is not practical to provide examples for each of these documents, because some of these documents are highly dependent upon the business terms agreed to by the parties, we have provided models and resources where we felt it appropriate.
Governing Persons and Owners in Action: Liability Protection and Piercing the Veil of Texas Business Entities Chapter 7.2
Sole proprietors and partners in a traditional general partnership enjoy no protection from the debts and liabilities of the business. The various business entities that provide some type of liability protection do so under slightly varying approaches. These variations are discussed below.
Governing Persons and Owners in Action: Liability Protection and Piercing the Veil of Texas Business Entities Chapter 7.2
Sole proprietors and partners in a traditional general partnership enjoy no protection from the debts and liabilities of the business. The various business entities that provide some type of liability protection do so under slightly varying approaches. These variations are discussed below.
Fall, 2015
Includes articles the 84th Session of the Texas Legislature, specifically: "2015 Texas Legislative Update on Entity Law" by Daryl Robertson; "A Series LLC Is Now Included Under The Texas UCC’s Definition Of Person, Removing Uncertainty For Secured Lending Transactions" by James Leeland; "Power of Attorney Bill (HB 3095)" by Jacqueline Akins. There were two non-legislative articles as well, including: "Confidentiality of Email – The Changing Consensus" by Ronald Chichester; and "Texas Crowdfunding Portals Provide Texas Businesses New Access to Investment Dollars" by R. Jason Pierce.
Fall, 2015
Includes articles the 84th Session of the Texas Legislature, specifically: "2015 Texas Legislative Update on Entity Law" by Daryl Robertson; "A Series LLC Is Now Included Under The Texas UCC’s Definition Of Person, Removing Uncertainty For Secured Lending Transactions" by James Leeland; "Power of Attorney Bill (HB 3095)" by Jacqueline Akins. There were two non-legislative articles as well, including: "Confidentiality of Email – The Changing Consensus" by Ronald Chichester; and "Texas Crowdfunding Portals Provide Texas Businesses New Access to Investment Dollars" by R. Jason Pierce.
The Walking Dead: Forfeitures and Involuntary Terminations of Filing Entities
Do either of these sound familiar? 1) Your client tells you she wants to terminate her entity and she has heard that if she just ignores the notices from the Comptroller’s officer to file the franchise tax report the state will terminate her company for her. Your client called the Secretary of State’s office, and they told her she needs to file documents with the Comptroller and Secretary of State. The client asks why she should go to all that trouble when the state will terminate the entity for her if she does nothing? or 2) The client’s existence was forfeited for failure to pay franchise taxes in 2011, but the company has continued to operate and has a substantial amount of real and personal property, including intangible property such as receivables. This situation comes to your attention when you filed suit for the company to collect on a promissory note executed in favor of the company in 2010 that became due in 2016. The maker of the note is arguing that the company cannot sue on the note and that the claim is barred because it was not brought within three years after the company’s existence was forfeited. Now that the company’s “forfeited existence” has come to your attention, you and the client have many questions. Can the company collect on the note? Where does the company stand with respect to its assets, rights, and liabilities?Does anyone in the company have any personal liability for liabilities incurred in the business? Can the company reinstate even though it is beyond the three-year post-termination survival period? What effect will a reinstatement have?