Integrity Law Group PLLC

Key Legal Considerations for Small Business Owners

Starting a business is an incredibly exciting venture. It can bring financial stability and independence and even a legacy for you to leave behind for your family. However, starting a business can also present unique legal challenges. Before you start operating your business, you must meet certain legal requirements. Below, our Houston business attorney outlines the checklist you need to make sure your small business is in compliance with the law.

Your Business Structure

One of the first things you must decide is the business structure you want to use. Your business structure will have a significant impact on your personal liability in the event of a business lawsuit, the manner in which you will run your business, your business taxes, and the people involved in your company. There are many different types of business structures, and they are as follows:

  • Sole proprietorship
  • General partnership
  • Corporation
  • Limited liability company
  • Limited partnership
  • Limited liability partnership

It is important to speak to a business attorney before choosing your business structure. An attorney can explain more about the different structures and help you determine which one is right for you.

Choosing Your Business Name

After determining which type of business structure you will use, you then need to think of a name for your business. The name of your business will depend on many factors, namely the type of business you are starting. For example, choosing a fun and playful name for your business may be appropriate if you are serving younger crowds or your products and services are not that serious in nature. On the other hand, if your business is more professional in nature, such as an accounting firm, you may want to choose a name that reflects that.

After deciding on a name, you will need to register and file the business name with your local county clerk’s office. You should also consider registering your business name as a trademark so you can use it exclusively.

Tax Considerations

All businesses in Texas and throughout the country have to pay taxes. You will need to obtain an Employer Identification Number (EIN) for tax purposes, as well as a sales tax permit if you are going to be selling taxable goods. For example, if you are opening a grocery store, basics such as flour, bread, and eggs are not subject to taxes. However, snack foods are taxable so you will have to obtain an EIN and a sales tax permit for the taxable goods you are selling.

Permits and Licenses

Texas law does not require you to obtain a general business license. However, depending on the type of business you are starting, you may need certain licenses and permits. These permits and licenses are issued by local councils. You may need zoning permits, health permits, building permits, occupational permits, tax permits, or signing permits. Our Houston business attorney can help you determine which permits and licenses you need so that once your business is in operation, it stays in operation.

Insurance Considerations

Texas law does not require many types of business insurance. For example, if you have employees, you can likely choose not to purchase workers’ compensation in the event that any of them become injured on the job. Purchasing workers’ compensation is not generally required of business owners in Texas. Still, there are certain types of insurance you should purchase to protect your business. If you do purchase workers’ comp, for instance, it can protect you from liability lawsuits in case one of your employees becomes hurt.

General liability insurance is also recommended for small business owners. This type of insurance can protect you from personal liability if someone becomes hurt on your business’ property. If your company uses vehicles to conduct business, you are also required to obtain commercial auto insurance.

Protect Your Intellectual Property

Your intellectual property is likely at the core of your business. It is the very thing that makes your business what it is, and what makes it stand out among your competition. Intellectual property can include trade secrets, trademarks, formulas, recipes, copyrights, and patents. Filing a patent can take as long as five years, so it is important that you start this process right away.

Making sure that your intellectual property is protected can attract investors in the future, but it also provides you with the reassurance that you will be able to keep operating your business in the same manner. For example, if you are a restaurant and do not protect the secret recipe that contributes to your success, someone else could use it in the future. In fact, they may even be able to patent it to prevent you from using it even though you were the one who created it.

Draft an Employee Handbook

It is important to draft an employee handbook that outlines your business’ policies, and the rights and responsibilities of your workers. For example, an employee handbook can outline the protocol to follow if a worker feels as though they were a victim of sexual harassment or discrimination. 

In addition to creating an employee handbook, you should also review it regularly and make the necessary revisions to ensure that your company is in compliance with federal, state, and local laws. If you do not give every worker their own individual handbook, you should keep a copy in a visible place that is easily accessible, such as a staff room.

Our Business Attorney in Houston Can Advise You of the Key Legal Considerations

Starting a business is exciting, but there are many legal considerations, as well. It is important that you know what these are so you and your company are protected. At Integrity Law Group, PLLC, our Houston business attorney can answer your questions, make recommendations, and make sure you are in compliance with all of the laws that affect your business. Call us now at (832) 280-8874 or fill out our online form to schedule a consultation with our experienced attorney and get the legal help you need.

How to Handle Contractual Infringements by Your Business Partner

After forming a business partnership, the parties often draft a formal partnership agreement. The main purpose of a partnership agreement is to detail each party’s rights and responsibilities and outline what will happen if one party breaches the agreement. A breach of a contract agreement is very difficult for all parties. Below, our Houston business law attorney outlines the steps to take after a contractual infringement by your business partner.

What is Included in a Partnership Agreement?

Forming a business partnership is about so much more than simply doing business together. It is also about establishing a contractual business relationship. The priorities and preferences of the parties involved guide the particular terms of a partnership agreement. The majority of contracts between business partners answer the following questions:

  • Which party or parties have financially contributed to the partnership, and how much were those contributions worth?
  • Which party or parties have agreed to make continuing financial contributions?
  • Is the partnership a limited partnership, a general partnership, or another form of partnership?
  • What are the legal rights and obligations of each partner?
  • How much compensation will each partner receive?
  • How will an infringement of a partnership agreement be resolved?
  • What are each of the partners’ fiduciary duties to the partnership?
  • Who has the right to vote, the obligation to vote, and when?
  • How can someone become a partner?

A properly drafted agreement with well-defined terms makes all the difference when an infringement occurs. Our Houston business law attorney can draft an agreement that will limit disputes and outline how to resolve them if they arise.

Why Do Contractual Infringements Arise?

A contractual infringement in a business partnership can happen for a number of reasons. The most common of these include:

  • Missing or ambiguous terms: When a contract is not properly drafted, it can cause confusion between the parties about their legal rights and obligations under the agreement. Missing or ambiguous terms can cause disputes to arise between partners.
  • Using company funds improperly: Infringements can arise when a partner spends company funds unscrupulously or improperly. This can affect not only the partnership but also the relationships between the partners and other associates and the business as a whole.
  • Acting without authority: Any time a partner acts without authority, it can cause issues in the business. For example, one partner may become excited about a potential business deal and sign the business up for it without obtaining the appropriate permission from the other partners.
  • Failing to recognize or address conflicts of interest: Conflicts of interest can happen when one partner is presented with an opportunity in which they will personally benefit. This alone does not necessarily create a conflict of interest, but it can be a red flag. Partners who fail to address possible conflicts of interest can breach their ethical obligations to the business.

When any of the above contractual infringements occur, there are a number of ways to resolve them.

Filing a Claim for Breach of Contract

If your partner has acted outside of the terms of the partnership agreement, you or the business may have to file a lawsuit against your partner for breach of contract. A breach of contract action can include allegations that your partner acted in bad faith. 

Under Texas law, all business partners are required to act in good faith. Business partners owe a duty of care to the company. Depending on the specific issue, you may also have to file a claim for a breach of fiduciary duties against your business partner.

Negotiating a Settlement

Not all lawsuits will end up in the courtroom. You and your partner may be able to negotiate a settlement agreement. In most cases, settlements occur while a lawsuit is pending, but there are exceptions to this. During negotiations, the parties will define what happened and the possible remedy that may be appropriate. As part of a settlement, the partners involved typically agree to keep the settlement amount and other arrangements confidential.

Expelling the Infringing Partner from the Business

Depending on the specific circumstances and the terms of the partnership, it may be possible to remove the infringing partner from the business. The applicable law and the terms within the contract, such as a buy-sell agreement, may determine if this option is available to you.

Pursuing Damages

The best option for remediating harm sustained by the business may be to pursue damages from the infringing partner. Again, the terms of the partnership agreement and the applicable law may define the amount of damages that are available. A business law attorney can help you maximize the damages you can pursue.

What Happens if You and Your Partner Do Not Have a Formal Agreement?

It is always recommended that business partners draft an agreement in the event that a dispute arises. However, not all partners draft these contracts when forming a partnership. If this is the case for you, there are still possible options under the Texas Business Organizations Code if your business partner has acted improperly. 

The Code provides options if you have a partial or incomplete agreement. Under Section 152.211(a), you can move forward if your partner has violated any duties under the partnership. To understand what these are, it is important to work with a Houston business law attorney who can advise you or your legal options.

Our Business Law Attorney in Houston Can Help After a Contract Infringement

For business owners, there is nothing more important than protecting your business, your investments, and your business relationships. At Integrity Law Group, PLLC, our Houston business law attorney has the ability to draft an agreement for you that will help you accomplish all of these tasks. 

If your partner has already infringed on a contract, we can advise you of your legal options and the next steps to take, as well. Call us now at (832) 280-9197 or fill out our online form to schedule a consultation with our experienced attorney and learn more about how we can help.

Protecting Your Personal Assets in the Event of a Business Lawsuit

It is critical to protect your personal assets in business, particularly when you are facing a lawsuit. A lawsuit will be bad enough for your business, but you do not want it destroying your personal property, as well. Below, our Houston business law attorney outlines some of the best ways to protect your personal assets in the event of a business lawsuit.

Use Proper Business Entities

Using the right business entity is critical for protecting your personal property in the event of a business lawsuit. To give yourself peace of mind and a sense of security, you should consider all possible options before making a final decision, from limited partnerships to corporations to LLCs. Do not unnecessarily make yourself vulnerable. By establishing the proper business entity, you will have legal protection in the event of litigation or a business dispute. The different business entities and the protection they do or do not provide are as follows:

  • Sole proprietorships: As a sole proprietor, you and your personal assets have no protection in the event of a business lawsuit. One mistake can jeopardize your personal assets, as well as your business’ profits and income.
  • General partnerships: A business partnership can be profitable for all parties, but it can also come with some risks. If your business is sued, you and your partner could be held jointly liable, so it is important to choose partners carefully.
  • Limited partnerships: A limited partnership will allow you to enjoy the benefits of being an entrepreneur without exposing yourself to the risks associated with it. When you structure your business as a limited partnership, any lawsuits filed against the business do not extend to any assets outside of it. 
  • Corporations: Establishing a corporation is a great way to protect your personal assets in the event of a business lawsuit. Generally speaking, your personal assets are not vulnerable to a business lawsuit unless fraud is involved.
  • Limited Liability Companies: LLCs offer great asset protection, as well as flexible taxation options. Owners of an LLC can protect their business from creditors, who would only be awarded a membership interest without gaining control or access over the assets of the company.

Insurance

Certain professions, such as doctors, financial advisors, and real estate agents, are at particular risk of having a lawsuit filed against them. Insurance is very valuable when trying to protect your personal assets, so it is critical to ensure that coverage is sufficient and that it remains current. Sometimes, investing in extra coverage can be the difference between staying afloat or facing financial ruin during a lawsuit. The different types of insurance businesses may need are as follows:

  • Homeowners insurance
  • Commercial liability insurance
  • Worker’s compensation insurance
  • Auto insurance
  • Umbrella coverage
  • Long-term care insurance

Utilize Retirement Accounts to Protect Assets

Under federal law, retirement accounts offer a great deal of asset protection. Retirement plans that are ERISA-qualified have unlimited asset protection. It is critical to consult with a Texas business law attorney who knows the law and who can help determine whether creditors can choose between the federal and state exemption amounts.

Titling

You can protect property that is co-owned by looking at the titling options that are available. Tenancy by the entirety is an agreement between married couples that is legally binding and that protects the primary residence from a spouse’s creditors. This option does not always apply to investment properties, but there may be other forms of protection, such as tenants in common or joint tenancy, which can provide protection in the event the owner of the property passes away. To fully understand what title you need for your situation and to secure maximum asset protection, it is important to consult a lawyer who can help with these options.

Transfer Ownership to Family Members

Maintaining control of your assets is critical to ensure your financial security. By creating an irrevocable trust, you can place property into the trust, which protects it from creditor claims while also providing an inheritance or income stream for your family members and other loved ones in the future. This is only a viable option if you have sufficient funds, and the transfer of ownership will not leave you insolvent. Some of the most common types of trusts used to protect assets from lawsuits are as follows:

  • Domestic asset protection trust: This type of trust exists solely for the benefit of the person who created the trust. A domestic asset protection trust allows the creator to keep a certain degree of interest in the property in the trust. Unlike in other states, though, a domestic asset protection trust does not protect the creator if they are also the beneficiary of the trust.
  • Lifetime qualified terminable interest trust: A lifetime qualified terminable interest trust is for the benefit of the spouse, and they utilize the gift tax marital deduction to reduce overall taxes. This type of trust can also use the federal estate tax exemption for the less wealthy spouse and provide a lifetime of asset protection for the benefit of the wealthier spouse.
  • Medicaid planning trust: Through a Medicaid planning trust, a person can qualify for Medicaid and still maintain an income for the spouse who does not apply. When assets are transferred into these trusts, they can pass to heirs who are protected from the government’s estate recovery, which would require the Medicaid assets to be paid back during the lifetime of the creator.
  • Spousal lifetime access trust: A spousal lifetime access trust is created for the benefit of a spouse and uses the lifetime gift tax exemption as well as the annual exclusion gifts.

Our Business Law Attorney in Houston Can Help Protect Your Assets

As a business owner, it is important that you not only protect your company, but your personal property, as well. At Integrity Law Group, PLLC, our Houston business law attorney can advise on your case and suggest the best asset protection tools to use. Call us now at (832) 280-8874 or contact us online to schedule a consultation and to learn more.

Navigating the Most Frequent Forms of Business Legal Disputes

Running a successful business involves fostering a number of relationships. Business owners hire employees, use third-party vendors, have partners and shareholders, as well as a number of other relationships. Within any one of these relationships, a dispute can arise. Business legal disputes are never good for a company. They detract from the overall profitability, interrupt business operations, and even hurt the business’s reputation.

Unfortunately, it is virtually impossible for any business to avoid becoming involved in a dispute. Although there are some ways business owners can try and prevent a dispute from interrupting their business, the vast majority will find themselves in a legal dispute at some point. Below, our Houston business law attorney outlines the most common types of disputes, as well as how to resolve them and prevent them from arising in the first place.

Common Types of Business Legal Disputes

From breaches of contract to infringement of trade secrets and partnership disputes, there are many disagreements that can arise within a company. The most common of these include:

  • Breach of contract: A breach of contract is a legal dispute that arises when two or more people enter into a formal agreement, and one party fails to fulfill the terms of the contract. All businesses must enter into some kind of contract, whether it is a lease agreement, employment contracts, or agreements with third-party vendors.  As such, disputes involving a breach of the contract are some of the most common business disagreements.
  • Partnerships: There are many different types of disputes that can arise between business partners. Partners may disagree about the direction of the business, and how profits are to be distributed, and they may simply have different management styles. Due to the fact that these disputes involve the people who are most responsible for the operations of the business, they can significantly hurt a company, particularly when they are not resolved quickly.
  • Intellectual property disputes: Intellectual property laws protect a creator’s rights to their own original work. Disputes can arise within a business regarding who is the actual owner of the intellectual property or alleged patent, copyright, or trademark.
  • Employment disputes: There are a number of different types of employment disputes business owners must face. These can include discrimination, wage disputes, and harassment. It is not only current employees that may have a dispute, but former workers, as well. These individuals may file a lawsuit against a business owner for wrongful termination, or a business owner may take action against a former employee for a breach of a non-compete agreement.

How to Prevent Common Business Disputes

Of course, the best way to deal with common business disputes is to avoid them altogether. While this is not always possible, there are some tips that can help business owners avoid these costly and stressful disagreements. Some of the best tips to follow when avoiding business disputes include:

  • Draft strong contracts: The best way to avoid future business disputes is to have strong and legally-binding contracts in place. A business law attorney can draft clear, specific, and carefully written contracts that can help you avoid a dispute.
  • Seek legal advice early: If a complex issue arises and you are unsure of how to approach it, or you just sense that something is not quite right, speak to a Houston business law attorney as soon as possible. Getting the legal help you need early on in the process can inform you on how to best proceed and can even help you avoid a dispute.
  • Document everything: As a business owner, you know the importance of documentation, and it can also help you avoid business disputes. Retain copies of all contracts, emails, loan documents, accounting information, meeting minutes, and file notes. A business law attorney can also help you develop an effective document retention strategy.

How to Resolve Business Disputes

Due to the fact that most businesses cannot avoid disputes altogether, it is important that all business owners know how to resolve them. Fortunately, there are a number of ways to do it. These are as follows:

  • Negotiation: Through negotiation, the parties involved in a dispute can try and resolve it amicably. Negotiation is not the most formal way to resolve a business dispute. Typically, business law attorneys are involved, as they have the skills and experience that allow them to navigate the process more effectively.
  • Mediation: During mediation, the parties involved in a dispute meet with a neutral third-party mediator. The role of the mediator is to help the differing sides communicate and compromise so they can reach an agreement. Mediation is one of the most affordable and quickest ways to resolve business disputes. If the parties reach an agreement during mediation, all parties involved in the dispute must follow it.
  • Arbitration: Arbitration is very similar to mediation. The parties involved in the dispute will meet with a third-party arbitrator and make their arguments. After hearing from all sides, the arbitrator will make the final decision, which is something mediators do not do. Many business contracts specify that arbitration is necessary in the event of a dispute, which bars the parties involved from going to court.
  • Litigation: Litigation is the most expensive way to resolve a business dispute, but it is still sometimes necessary. Litigation occurs when one party files a lawsuit against another person. If the case is not settled outside of the courtroom, the details of a lawsuit also become public record, which is often very harmful to a business.

Call Our Business Law Attorneys in Houston Today

Regardless of the type of dispute you are facing, it can cause significant harm to your business. It is important to resolve these disagreements as quickly as possible, so you can get back to running your company. At Integrity Law Group, PLLC, our Houston business law attorneys can advise on the most effective way to move forward so your case is resolved in a fast and efficient manner. Call us now at (832) 263-1828 or fill out our online form to schedule a consultation and learn more about how we can help.

Series Limited Liability Company (LLC)

What is a series LLC?

Historically, members had to file, manage, record, and report each LLC separately which meant more paperwork, more cataloging, more expense, and more reporting. That process created more unnecessary work and several issues for not only the members of the LLC but also for the states’ regulatory agencies. Some states have resolved this issue by enacting the series LLC. When done properly, a series LLC gives members protection from personal liabilities arising from multiple properties or operations without having the  extra expenses of multiple LLCs.

Series LLC also known as master LLC provides liability protection across multiple LLC entities. Business owners and investors (“Members”) create LLCs to protect their personal assets from legal liability. Members can add additional protection by forming series LLCs to hold each real property or business entity.

A series LLC is a designated “series” or “child” LLCs from the original LLC aka parent LLC. Each child can hold a specific property or properties, investments, assets, borrow money, or have a specific business purpose. In other words, each series can have its separate rights, powers, duties for specific assets or liabilities and can have a separate business purpose. Liabilities, debts, and obligations are only held against each child LLC and not against the parent LLC or other child(ren) LLCs. Each designated LLC has its own governing documents establishing its members, managers, and membership interests. It can also file lawsuits, be sued separately from the parent LLC, enter into contracts, hold title and secure interest in assets. 

According to the Texas Business Commerce Code (TBCC) Section 1.201(b)(27), Legislators defined Texas series LLC as a legal “person.” Under the Texas Uniform Commerce Code (TUCC) Section 9.102(3) a debtor is a person obligated on an account, chattel paper, or general intangible. This new law allows series LLCs to acquire assets through debt.

Series LLC are commonly used for business ventures, multiple investments or rental properties, or businesses that operate multiple channels of revenues. One of the benefits of a series setup is that Members can avoid filing separate tax returns for each series. 

How does someone form a  Texas series LLC?

According to Texas Business Organizations Code (TBOC) Section 101.602(a)(1)-(2), specific languages must be included in the certificate of formation, operating agreement, and maintain separate books and records for each series. In order to receive series LLC benefits, the series must be filed with the Texas Secretary of State, have a unique name from its siblings and parent LLC, conduct business, and be in compliance with the Texas Business Commerce Code and Texas Business Organizations Code. 

There are three  types of series LLC: (i) registered LLC, (ii) protected LLC, and (iii) series LLC that doesn’t fall into registered or protected LLC class. 

The minimum requirements to get the benefits of a series LLC is under TBOC Section 101.602(a)(1)-(2) which states that the series LLC must be included in the certificate of formation and company agreement, and the company must maintain separate records for the assets of each series. See TBOC section 101.601 through 101.621. Generally, under the certificate of formation, under the supplemental text section of the form, you add the series information. 

Protected series requires that the LLC certificate of formation must provide notice of the series structure and the LLC agreement must permit the formation of different series. The series LLC must be properly recorded and maintain accounts for separate assets and liabilities for each series. Essentially, to file for a protected series, you must file an assumed name certificate in compliance with Chapter 71 of TBOC. 

Registered series requirements are the same as protected service with additional documentation that a certificate of registered series is filed with the Texas Secretary of State by the parent LLC. When done properly, this is particularly beneficial when  a third party vendor or purchaser of the company requires a certificate of status which shows the registered series in use and in good standing with the State. Additionally, registered series can file other documents with the Texas Secretary of State in relation to that series and provide certified copies to third party vendors or purchasers. 

To form a name for a registered series, it must state the name of the parent company, followed by R.S or RS, then name of the series. For instance, if the parent is Texas Real Estate Group LLC, the following are acceptable: 1. Texas Real Estate Group LLC – RS Harvest Blue Houston or 2. Harvest Blue Houston, a registered series of Texas Real Estate Group LLC.

Texas is one of the few states that offer series LLC. Not all states will recognize Texas series LLC, however, Texas is unique in that it will allow you to register out of state series LLCs also known as foreign series LLC. 

The laws of a series LLC are ever changing and ever growing. It is a relatively new law and solution provided by some states. Although this article provides some basic information on the series LLC, we always recommend that you do additional research through credible sources and keep up with the law. We will always make good faith efforts to continue to update our articles and resources. 

To learn more about series LLC, contact us to schedule a consultation.

Texas LLC Formation

A limited liability company (LLC) is a business structure that is permitted by individual state statutes. In Texas, the Business Organizations Code allows for the creation of LLCs. An LLC is formed by filing a certificate of formation with the Texas Secretary of State. Generally, an LLC is owned by its members. The LLC is a separate legal entity from its members, therefore providing liability to its members (except in the case of piercing the corporate veil, etc.). An LLC can serve many purposes, such as for your small business, or if you are a real estate investor, it can hold your rental properties. There are advantages and disadvantages to forming an LLC: 

To name a few advantages: 

  • Offers some asset protection, 
  • Tax advantages,  
  • Succession planning opportunities, 
  • Separation between yourself and your business, 
  • Anonymity, and 
  • Credibility as an established business.

However, there are also disadvantages: 

  • Requires maintenance/upkeep,  
  • Costs, 
  • Individuals are responsible for paying self-employment taxes,
  • LLC does not fit all business criteria (ex. LLC are not eligible for Section 1202 Gain Exclusions, pass through investment, complex capital raising etc), and
  • If the LLC is formed for rental properties, you may run into lending issues, etc. 

Within the LLC formation there is also the series LLC. To learn more about series LLCs click here. Additionally, there are other types of businesses that you can form in Texas, including partnerships, sole proprietorships, corporations, etc. To learn more about other business entities, be sure to check out our articles and resources tab. After you have done your research and you decide that an LLC is the best choice to suit your needs, the steps are: 

  1. File a certificate of formation with the Texas Secretary of State,
    1. Be sure to check the name availability of your LLC first. If a name is already in use, you have to come up with another name, 
    2. Also, consider whom you want to name as your registered agent (typically you can name yourself. There are also registered agent services you can find online. The advantage of using a registered agent is that you can use their physical address instead of your own. This is especially important if you do not have an office address and plan to use your home address. Additionally, Walter & Truong PLLC offers this service. Reach out to a Walter & Truong LLC attorney to find out more),  
  2. This step is optional, but recommended, file for an employment identification number (EIN) with the Internal Revenue Services (IRS),
  3. Create an operating agreement (and other necessary documents such as resolutions if needed),  and 
  4. If you have more than one member, plan your initial meeting with all the members. 

Although the steps are fairly straightforward, if it is your first time creating a business entity, you may have additional questions about proper procedure, forms, documents, and other concerns. For a flat rate Walter & Truong PLLC can take care of the whole process for you. Contact us to schedule consultation here to get started.

Back to top