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March 1, 2011Val Ricks
Three Suggestions for the Texas Limited Liability Company Law
In this paper, I describe what I believe are the three most inexplicable Texas LLC laws. The first (described in Part I) is the provision purporting to address resolution of managers', managing members', and officers' conflicts of interest. This statute is drawn to mimic exactly a provision applicable to corporations. But the statute actually contains no language addressing conflicts of interest! The second statute (in Part II) addresses agency and the LLC. This provision was taken from the partnership code but adapted to the LLC in a manner I find befuddling. Read literally, it abolishes the common law of agency as applied to agents of LLCs. The third provision (Part III) is a bit of corporate code addressing veil-piercing that does not exist in the LLC code but is being applied to LLCs by the courts as if it did. It is difficult to explain why this provision should be imported, and the code forbids it.
June 1, 2016Texas Journal of Business Law
Texas Journal of Business Law, Volume 46, Issue 3
The entire issue, all in one file.
June 1, 201620285500, Daryl B. Robertson
Entity Acquisitions Under the Texas Business Organizations Code, Including the 2015 Amendments
The Texas Business Organizations Code (the TBOC or the Code) is a substantive codification of the prior Texas statutes governing non-profit and for-profit private-sector entities, which, for the most part, were repealed effective as of January 1, 2010. These statutes consisted of the Texas Business Corporation Act (TBCA), Texas Miscellaneous Corporation Laws Act (TMCLA), Texas Limited Liability Company Act (TLLCA), Texas Revised Limited Partnership Act (TRLPA), Texas Revised Partnership Act (TRPA), Texas Non-Profit Corporation Act (TNPCA), Texas Real Estate Investment Trust Act (TREITA), Texas Uniform Unincorporated Nonprofit Associations Act (TUUNAA), Texas Professional Corporation Act (TPCA), Texas Professional Associations Act (TPAA), Cooperative Associations Act (CAA) and other existing provisions of Texas statutes governing private entities.
November 1, 201517052300
2015 Texas Legislative Update on Entity Law
This article summarizes several pieces of legislation passed by the Texas Legislature in its 2015 Regular Session that amend primarily the Texas Business Organizations Code (the “Code”).
November 1, 2013Legal Opinions Committee of the Business Law Section
Supplement No. 6 to the Report of the Legal Opinions Committee Regarding Legal Opinions In Business Transactions
Statement on Changes to the Procedure for Good Standing Certificates Issued by the Texas Comptroller of Public Accounts
November 1, 2012Legal Opinions Committee of the Business Law Section
Supplement No. 5 to the Report of the Legal Opinions Committee Regarding Legal Opinions in Business Transactions
Statement on Entity Status, Power and Authority Opinions Regarding Pre-Code Texas Entities and Pre-Code Registered Foreign Entities Under the Texas Business Organizations Code
November 1, 201214071200
Practical Pitfalls in Drafting Texas Limited Liability Company Agreements
This article provides drafting guidance on a variety of topics related to the creation of Texas limited liability companies, including sample clauses, checklists, and boilerplate language (among many other aspects). By following these guidelines, drafters can avoid common pitfalls and create a robust, enforceable Texas LLC agreement.
May 1, 2020Elizabeth S. Miller
Overview of Fiduciary Duties, Exculpation, and Indemnification in Texas Business Organizations
Statutory developments beginning in the 1990s have impacted the analysis of fiduciary duties in the Texas business organizations context. The duties of general partners are now defined by statutory provisions that delineate the duties without referring to them as “fiduciary” duties and specifically provide that partners shall not be held to the standard of a trustee. Whether limited partners in a limited partnership have fiduciary duties is not well-settled, but the Texas Business Organizations Code (BOC) clarifies that a limited partner does not owe the duties of a general partner solely by reason of being a limited partner. While the fiduciary duties of directors are still principally defined by common law, various provisions of the corporate statutes are relevant to the application of fiduciary-duty concepts in the corporate context. Because limited liability companies (LLCs) are a relatively recent phenomenon and the Texas LLC statutes do not specify duties of managers and members, there is some uncertainty with regard to the duties in this area, but the LLC statutes allude to or imply the existence of duties, and managers in a manager-managed LLC and members in a member-managed LLC should expect to be held to fiduciary duties similar to the duties of corporate directors or general partners. In each type of entity, the governing documents may vary (at least to some extent) the duties and liabilities of managerial or governing persons. The power to define duties, eliminate liability, and provide for indemnification is addressed somewhat differently in the statutes governing the various forms of business entities.
November 1, 201917052300
2019 Texas Legislative Update on Amendments to Entity Laws
It has been highly anticipated that changes to Texas Business Entity Laws were to be adopted. In 2019, the Texas Legislature approved numerous amendments to the Texas Business Organization and the Texas Business and Commerce. The new pieces of legislation apply to: Limited Liability Companies, Partnerships, Non-profit Corporations and For-profit Corporations. This article provides a detailed explanation of all amendments that were established.
November 7, 2025Daryl B. Robertson
2025 Amendments to the Texas Business Organizations Code
This article primarily summarizes several pieces of legislation that were passed by the Texas Legislature in its 2025 Regular Session and that amend the Texas Business Organizations Code (the “TBOC”) There are many other bills that were passed affecting business law, so this article should not be viewed as containing a listing of all business- related bills. The article contains summaries only and should not be relied on as a complete description of any bill or portion thereof.
November 7, 2025Cliff Ernst, Gail Merel
Update On Legal Opinion Matters, Including the Texas Corporate Opinion Report
In 1992, the Legal Opinions Committee of the Business Law Section of the State Bar of Texas (Texas Legal Opinions Committee) issued its Report Regarding Legal Opinions in Business Transactions. 1 Six supplements to the 1992 Legal Report have since been issued to update aspects of the report. 2 Most recently, in 2019, a subcommittee of the Texas Legal Opinions Committee began work on a new Corporate Opinion Report to update sections of the 1992 Texas Report addressing corporate status, corporate power, corporate action, and corporate shares in regard to Texas - formed corporations and opinions often requested in regard to the registration and good standing of corporations formed outside of Texas. 3 This presentation reports on the status of the Corporate Opinion Report and includes information about the background and evolution of reports that address third-party opinion letters 4 and the opinions given therein, and why those reports are important.
March 20, 2025Cliff Ernst, 14071200
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.
November 7, 202417052300
The New Texas Business Courts
House Bill No. 19 (as amended, “HB 19”) was passed by the 2023 Texas Legislature in its Regular Session and was signed into law by Governor Abbott on June 9, 2023. HB 19 became effective on September 1, 2023. 2 HB 19 added a new Chapter 25A to the Texas Government Code that established a business court for the State of Texas. 3 The business court commenced operations on September 1, 2024. This article summarizes many of the provisions of HB 19 but should not be relied on as a complete description of that bill. Efforts to pass some kind of business court legislation started in 2015. Several groups of trial attorneys opposed the legislation in prior sessions. A coalition developed between the 2021 and 2023 sessions of the Texas Legislature to support a business courts bill. The business courts bill was one of Governor Abbott’s top legislative priorities for the 2023 Legislature. The bill was also strongly supported by House Speaker Phelan and Lieutenant Governor Patrick. The business court bills in both the House and Senate were given very low bill numbers, indicating that they were priority legislation sponsored by leadership. HB 19 was originally authored by Representatives Murr, Leach, Landgraf, Meyer and Lujan and then co-authored by 72 other House members. HB 19 was sponsored in the Texas Senate by Senator Bryan Hughes. During the 2023 Session, the bill did face significant opposition, which resulted in numerous amendments on the floor of the House and in Senate Committee after HB 19 was passed by the House. The sponsors and proponents of the bill managed to overcome the opposition to the bill. The bill addresses the growing need for specialized Texas courts to handle complex business litigation. It is hoped that the business court created by HB 19 will result in more predictable outcomes for business disputes and make Texas a more attractive place for resolving business disputes. With the establishment of the business court, Texas joins approximately 30 other states, including California, New York, Illinois, Massachusetts, Pennsylvania, North Carolina, Georgia, Tennessee and Florida, that have established specialized courts to hear business or commercial disputes. Specialization should allow for greater efficiency in the handling of cases by the business court as the judges develop expertise in handling a concentrated docket of business law cases. The business court judges will also not have to balance a large docket of non-business cases, many of which have been granted priority over business law cases by the Texas Legislature in Texas Government Code Secs. 23.101-103.
November 8, 202406477000, J. Machir Stull, Cliff Ernst
Divisive Mergers
These presentation slides discuss the statutes that govern divisions of entities in Texas and Delaware; the legal effect of division transactions; general tax implications; how creditors are affected inside and outside of bankruptcy; application of fraudulent transfer law; and discussion of relevant case law. The authors provide a sample Plan of Divisive Merger for use with Texas entities.
May 31, 2024Jarratt Watkins, David Cook, James "Drew" Neill
Membership Interests Purchase Agreement
This is a sample Membership Interests Purchase Agreement
March 3, 2024Cliff Ernst, 14071200
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.
March 22, 202417052300
Shareholder Agreements: Drafting and Analysis
Under the Texas Business Organizations Code (the “TBOC”), there are three kinds of shareholders agreements for a Texas for-profit corporation. First, there are shareholders agreements between the corporation and one or more of the corporation’s shareholders or agreements between two or more shareholders that are not executed by all of the shareholders of the corporation. The TBOC has no specific provisions governing this first kind of shareholders agreements other than to state that the statutory provisions governing the other two kinds of shareholders agreementsdo not prohibit or impair such agreements. Second, there are written shareholders agreements that are executed by all of the shareholders at the time of the agreement and made known to the corporation. Third, there are shareholders agreements that are contained in the certificate of formation or bylaws if approved by all of the shareholders at the time of the agreement. The latter two forms of shareholder agreements are authorized and governed by Subchapter C of Chapter 21 of the TBOC. These latter agreements may be amended only by all of the shareholders at the time of the amendment, unless the agreement provides otherwise.4 This article refers to the latter kinds of shareholders agreements as “statutory shareholders agreements”.
November 12, 202317052300
2023 Texas Legislative Update on Amendments to Texas Business Organizations Code
This article summarizes several bills that were passed by the Texas Legislature in its 2023 Regular Session and that amend the Texas Business Organizations Code (the “TBOC”). There are many other bills that were passed affecting business law, so this article should not be viewed as containing a listing of all business-related bills. The article contains summaries only and should not be relied on as a complete description of any bill or portion thereof.
March 4, 2023Cliff Ernst, K. "Andy" Tiwari
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.
November 6, 202100796198, Byron F. Egan
Audit Response Letters and Reserve Issues
The Sarbanes-Oxley Act of 2002 (H.R. 3763) (“SOX”) was enacted as a means to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws. SOX and the rules enacted thereafter affect how issuers of securities make disclosures, the protocols auditors use to audit their financial statements, and how lawyers respond to auditor requests for information regarding issuer loss contingencies. Among other things, SOX amended the Securities Exchange Act of 1934 (the “1934 Act”) and the Securities Act of 1933 (the “1933 Act”). Although SOX does have some specific provisions, and generally establishes some important public policy changes, it has been implemented in large part through rules adopted and to be adopted by the Securities and Exchange Commission (“SEC”) and the Public Company Accounting Oversight Board (“PCAOB”), which have impacted auditing standards and have increased scrutiny on auditors’ independence and procedures to verify company financial statement positions and representations. Further, while SOX is by its terms generally applicable only to public companies, its principles are being applied by the marketplace to privately held companies and nonprofit entities.
March 6, 2021Cliff Ernst
Report of the Legal Opinions Committee Regarding Legal Opinions in Business Transactions
This is the slide deck of the presentation.
November 7, 2019Daryl B. Robertson
2019 Texas Legislative Update on Amendments to Entity Laws
This article summarizes several pieces of legislation that have been passed by the Texas Legislature in its 2019 Regular Session and that amend the Texas Business Organizations Code and the Texas Business and Commerce Code. It covers changes to assumed name filings, authorized use of electronic data systems, delayed effectiveness of filings, deriviative proceedings, voting agreements, LLC provision amendments, partnership provision amendments, two-step offer merger transactions, ratification of defective acts, directors of non-profit organizations, and notice of redemptions by for profit corporations.
November 7, 2019Byron F. Egan
Derivative Actions Under the Texas Business Organizations Code
The fiduciary duties of directors or other governing persons of an entity and its officers are generally owed to the corporation, limited liability company (“LLC”) or limited partnership (“LP”) entity they serve and not to any individual owners. Thus, a cause of action against a director or other governing persons of an entity and its officers for breach of fiduciary duty would be vested in, and brought by or in the right of, the entity. Statutes in both Texas6 and Delaware authorize an action brought in the right of the entity by a stakeholder against its Board for breach of fiduciary duty.8 Such an action is called a “derivative action.” The TBOC was amended in the 2019 Legislative Session to make consistent derivative proceedings provisions governing for profit corporations with those governing LLCs and LPs by House Bill No. 3603, which became effective on September 1, 2019.
July 11, 2019Ladd A. Hirsch
Entities and Marital Property Law: Interrelated Claims and Assets
Valuing assets is part art and part science. In a litigation context, it becomes even harder. In a divorce case, the difficulty again multiplies. Preparing a valuation with the hypothetical assumptions required by Texas case law further complicates the process. There is no simple “cookbook” approach to valuing assets. The appraiser must be intuitive in his or her approach. One challenging the appraiser, in Court or otherwise, must be prepared to not only have a complete understanding of the asset itself, but also a complete understanding of the approach chosen by the appraiser, the approaches discarded as inappropriate, and why one was deemed better than another in this case. There is no substitute for hard work, thorough attention to detail, and that spark of imagination and creativity necessary to achieve results that stand the test of time.
November 7, 2019Frank Sommerville
Forming New Non-Profits
Many attorneys use the term “nonprofit” interchangeably with the term “tax-exempt.” They are not the same. Chapter 22 of the Texas Business Organizations Code (“Code”) governs nonprofit corporations. A nonprofit corporation may be exempt from various taxes, or it may be subject to various other taxes. “Tax-exempt” means that the organization is exempt from one or more federal or state tax. Frequently, the tax exemption requires that the organization qualify as a nonprofit corporation. This paper discusses entities commonly used by non-profits, purposes that qualify non-profits for tax-exempt status and common mistakes made. The author also provides a list of tax-exempt purposes under federal and Texas law, a certificate of formation for a non-profit corporation and bylaws for a non-profit corporation.