Investment / A&M / Contracts / Litigation

BUSINESS ESTABLISHMENT IN TEXAS

There are four major types of business structures frequently used in Texas:

• Sole proprietorship:this is the most common and the simplest form of business structure. In a sole proprietorship, a single individual engages in a business activity without necessity of formal organization. The business owner has unlimited liabilities for the losses of the business.
• General partnership:A general partnership is created when two or more persons associate to carry on a business for profit. A partnership generally operates in accordance with a partnership agreement, but there is no requirement that the agreement be in writing and no state-filing requirement. General partners have unlimited liabilities for the losses of the business.
• Corporation: A corporation is a legal person with the characteristics of limited liability, centralization of management, perpetual duration, and ease of transfer-ability of ownership interests. The owners of a corporation are called shareholders. The persons who manage the business and affairs of a corporation are called directors. An S corporation is not a matter of state corporate law but rather a federal tax election. A for-profit corporation elects to be taxed as an S corporation by filing an election with the Internal Revenue Service.
• Limited Liability Company: The owners of an LLC are called members. A member can be an individual, partnership, corporation, trust, and any other legal or commercial entity. Generally, the liability of the members is limited to their investment and they may enjoy the pass-through tax treatment afforded to partners in a partnership. As a result of federal tax classification rules, an LLC can achieve both structural flexibility and favorable tax treatment. A limited liability company can be managed by managers or by its members.

Assumed Name Certificate (DBA)
If the business will operate as a sole proprietorship or a partnership, an assumed name certificate is filed with the office of the county clerk in each county in which the person (1) has or will maintain business or professional premises; or (2) conducts business or renders a professional service, if the person does not or will not maintain business or professional premises in any county. A corporation, limited partnership, limited liability partnership, limited liability company, or foreign filing entity must file a certificate if the entity: (1) regularly conducts business or renders professional services in this state under an assumed name; or (2) is required by law to use an assumed name in this state to conduct business or render professional services. The certificate is filed with the office of the secretary of state and in the office or offices of each county clerk where the entity’s principal office of business or registered office is located.

A certificate is effective for up to 10 years from the date the certificate is filed. A person’s failure to file the certificate as required does not impair the validity of any contract or act by the person or prevent the person from defending any action or proceeding in any court of this state, but the person may not maintain in a court of this state an action or proceeding arising out of a contract or act in which an assumed name was used until an original, new, or renewed certificate has been filed as required.

DUE DILIGENCE

Before entering into an agreement or an investment, it is necessary to conduct an investigation of material facts involved in the transaction, including, for examples, regarding the other party involved in the transaction, several issues are crucial for the success of the transaction:

• What is its business structure?
• Who are its shareholders or owners?
• Who have the authorities to decide for it to enter into this transaction or not?
• Who is the legal representative of the business?
• Does it have necessary permits or licenses to run the business?
• Does the business have pending or past litigations?
• Who are on the management team?

A prudent businessperson should conduct due diligence before entering an agreement or an investment.

MERGER & ACQUISITION

A merger is an absorption of one or more business entities by another business entity. Two major types of merger: (1) one company acquiring all of the other company’s (or companies) assets and liabilities and the acquired business entity is out of existence after the merger; or (2) all companies involved in the transaction are combined to create a new completely new entity with the existing business entities disappearing after the merger.

An acquisition takes place when one company acquires the assets or stocks of another company, but both companies continue to exist as separate entities. 

CONTRACT DRAFTING/REVIEWING

We have helped many clients draft and review different contracts, including sale and purchase agreement of assets or stocks, sale and purchase of real property, commercial lease, partnership agreement, company agreement, shareholders agreement, promissory note, and etc. The guiding principles for our works include win-win approach for both sides, and the adoption of fair, objective and reasonable standards to determine important issues.