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Model Company Agreements for Closely Held LLCs
It is often stated that one of the benefits of organizing an entity as a limited liability company is that this form of entity offers the owners and governing authority of the entity the flexibility to agree to provisions for the economic terms and governance that are more flexible than available with respect to a corporation. This is true, and indeed limited liability companies are sometimes used to create highly complex structures with multiple classes of ownership interests and highly customized provisions regarding management and governance of the entity, including complicated provisions for voting and management succession. However, given the large number of entities now being created as limited liability companies in Texas and other states, it is likely that many of these new entities are not entities with complex structures with multiple classes of ownership and complex bureaucracies for governance. Statistics compiled by the Internal Revenue Service show that for the tax year 2020 (the most recent year for which statistics are currently available), approximately 67% of the S corporation returns are for single-shareholder S corporations and approximately 24% have only two shareholders. The Internal Revenue Service does not publish similar statistics for limited liability companies, and single-member limited liability companies are typically disregarded entities that do not file tax returns. But if one assumes that most limited liability companies are closely held entities, then by analogy, it is likely that a large portion of limited liability companies have one or two owners. Therefore, it is much more likely that practitioners will find themselves needing to draft simple limited liability company agreements suitable for entities with one or two or a very few owners, rather than more complex documents.The purpose of this paper is to present and discuss models for governing agreements for limited liability companies when a simple structure is needed.
Appendix A of 2024 Model Company Agreements for Closely Held LLCs
Model Company Agreement for Manager-Managed, Multi-Member Limited Liability Company. This Model Agreement is Appendix A to an article by Cliff Ernst and Elizabeth S. Miller entitled Model Company Agreements for Closely Held LLCs (the “Accompanying Article”). This Model Agreement should not be considered a form to be completed by filling in the blanks. Drafters should be certain that any agreement used by them is appropriate for the particular transaction. This Model Agreement should be read together with the Accompanying Article, including the various references to the Accompanying Article throughout this Model Agreement.
Choice of Entities
These are the slides for the presentation
Jurisdiction and Venue in the New Texas Business Court: Practice Pointers for Drafting Business Agreements and Organizational Documents
Every year businesses organized in, having a presence or principal office in, or otherwise actively engaging in business in, the great state of Texas enter into hundreds of thousands of written contracts to govern their business arrangements (“Texas contracts”). Many of these Texas contracts include provisions expressing the parties’ agreements regarding the state, or subdivision of a state, in whose courts any litigation arising in connection with the contract will be conducted (choice of forum) and the specific county, city or court within that forum in which litigation arising in connection with the contract is to be conducted (choice of venue). Those agreements have been formed based upon the parties’ understanding of the laws of Texas and other leading commercial states governing the subject matter jurisdiction and geographic jurisdiction of their courts as established by statute and judicial decision.
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.
Common Pitfalls in Drafting LLC and LP Agreements
Given their structural flexibility and tax advantages, it is little wonder that limited liability companies (“LLCs”) and limited partnerships (“LPs”) have eclipsed the corporation as the primary entities of choice for new businesses in Texas. LLCs and LPs offer a myriad of almost limitless options on ownership structure, company governance and almost all other aspects related to the operation of the entity. However, as it is often said, with much freedom comes much responsibility. A practitioner who puts together a limited liability company (“LLC agreement”) or an agreement of limited partnership (“LP agreement”) for a client should be well versed in the overall structure of these entities and the variables that should be considered in drafting the operative agreement. Both LLCs and LPs are so-called “creatures of contract” in that the Texas Business Organizations Code (“TBOC”) chapters on LLCs and LPs give great deference to the LLC agreement or LP agreement to define the rights and obligations of the members and partners, respectively, of these entities. This paper analyzes select provisions of the LLC agreements and LP agreements that practitioners are likely to have to address in drafting an agreement for a client.
How Do You Incorporate an Entirely Digital Corporation?
This paper describes what attorneys need to know about incorporating companies that rely heavily – if not exclusively – on blockchains. Because technology is central to this topic, references will be provided for a brief introduction to: cryptocurrencies, blockchains (which is the underlying technology to cryptocurrencies), smart contracts, and distributed autonomous organizations. Finally, this paper will discuss the peculiar requirements for incorporating a blockchain-based company.
Formation and Governance of LLC's An Annotated Company Agreement
An Annotated Company Agreement (Short Form)
Annual Meeting of the State Bar of Texas: Business Law Section CLE - Co-sponsored by the Corporate Counsel Section
This is a compilation of the CLE materials from the Annual Meeting of the State Bar as presented by the Business Law Section. Please click on the link to download the materials that are available.
General Corporate Formation
Drafting Governing Documents
One of the very first steps in the lifecycle of a business is to form the business entity. The first decision will be to determine which type of legal entity will be the best fit for the business. Once the type of entity has been selected, the governing documents for that entity will provide the framework for the ownership, management and corporate governance structures of the business. This article provides an introduction to the types of entities available in Texas, the steps required to form a legal entity, and certain drafting considerations in connection with preparing an operating agreement for the entity.
The Basics from the Secretary of State's Office (Appendix A)
Registered Foreign Entity Merger Flowchart
The Basics from the Secretary of State's Office (Appendix B)
Registered Foreign Entity Conversion Flowchart
The Basics from the Secretary of State's Office (Appendix C)
Guide for Determining Permissible Entity Types
The Basics from the Secretary of State's Office (Appendix D)
Business Filings & Trademarks Fee Schedule
Drafting Governing Documents
One of the very first steps in the lifecycle of a business is to form the business entity. The first decision will be to determine which type of legal entity will be the best fit for the business. Once the type of entity has been selected, the governing documents for that entity will provide the framework for the ownership, management and corporate governance structures of the business. This article provides an introduction to the types of entities available in Texas, the steps required to form a legal entity, and certain drafting considerations in connection with preparing an operating agreement for the entity.
Model Company Agreements for Closely Held LLCs
Records maintained by the Texas Secretary of State indicate that the limited liability company has become the entity of choice among Texas organizations. The office of the Texas Secretary of State reports that of the 374,301 certificates of formation filed for domestic for-profit entities in 2024, 348,753 (or approximately 93%) were limited liability companies, and of the 391,934 certificates of formation filed for domestic for-profit entities in 2023, 365,417 (or approximately 93%) were limited liability companies. It is often stated that one of the benefits of organizing an entity as a limited liability company is that this form of entity offers the owners and governing authority of the entity the flexibility to agree to provisions for the economic terms and governance that are more flexible than available with respect to a corporation. This is true, and indeed limited liability companies are sometimes used to create highly complex structures with multiple classes of ownership interests and highly customized provisions regarding management and governance of the entity, including complicated provisions for voting and management succession. However, given the large number of entities now being created as limited liability companies in Texas and other states, it is likely that many of these new entities are not entities with complex structures with multiple classes of ownership and complex bureaucracies for governance. Statistics compiled by the Internal Revenue Service show that for the tax year 2021 (the most recent year for which statistics are currently available), approximately 68% of the S corporation returns are for single-shareholder S corporations and approximately 24% have only two shareholders. The Internal Revenue Service does not publish similar statistics for limited liability companies, and single-member limited liability companies are typically disregarded entities that do not file tax returns. But if one assumes that most limited liability companies are closely held entities, then by analogy, it is likely that a large portion of limited liability companies have one or two owners. Therefore, it is much more likely that practitioners will find themselves needing to draft simple limited liability company agreements suitable for entities with one or two or a very few owners, rather than more complex documents. The purpose of this paper is to present and discuss models for governing agreements for limited liability companies when a simple structure is needed.
Joint Venture Critical Issues: Formation, Governance, Competition and Exits
The joint venture is a vehicle for the development of a business opportunity by two or more entities acting together,1 and will exist if the parties have: (1) a community of interest in the venture, (2) an agreement to share profits; (3) an agreement to share losses, and (4) a mutual right of control or management of the venture.2 A joint venture may be structured as a corporation, partnership, limited liability company (“LLC”), trust, contractual arrangement, or any combination of such entities and arrangements.3 Structure decisions for a particular joint venture will be driven by the venturers’ tax situation, accounting goals, business objectives and financial needs, as well as the venturers’ planned capital and other contributions to the venture, and antitrust and other regulatory considerations.4 Irrespective of the structure chosen, however, certain elements are typically considered in connection with structuring every joint venture.
The Convergence of Artificial Intelligence and Distributed Autonomous Organizations: (Auto)Generating New Legal Issues
Artificial intelligence is all about decision-making. We use ChatGPT to let the computer decide what we want to say, or how we want to say it. We use other forms of AI to handle sometimes complex tasks without human intervention in a dynamic fashion that accommodates a given situation. Currently, however, DAOs employ “static” decision-making because the smart contracts (code) that makes up the DAO is immutably set on the blockchain, and thus the DAOs decision-making is intended to be determinative. This notion that DAOs are deterministic is an underlying assumption made by investors and legislatures when selecting or devising corporate forms for DAOs. However, technologically, there is nothing to prevent the combination of DAOs with AI, but that combination makes the DAO indeterminate and thus that combination calls into question the underlying assumptions implicit in current statutes.
Non-Profit Bylaws for Member Organization with Board of Directors
This is an Annotated Form
Non-Profit Bylaws for Non-Member Organization with Board of Directors
This is an annotated form.
Additional Provisions for Nonprofit Certificate of Formation
This is an annotated form.
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?
Skipping Through the Minefield: Navigating Ethical Issues That Arise When Family Members Go Into Business Together
Navigating Ethical Issues That Arise When Family Members Go Into Business Together. Part Three of a multi-part series made specifically for the Business Law Section