Integrity Law Group PLLC

What You Need to Know About LLP Formation: A Flexible Business Structure for Professionals

Limited liability partnerships (LLPs) have been popular among professionals such as doctors, lawyers, dentists, and architects since the 1990s. These business structures offer an alternative to general partnerships (GPs) and limited partnerships (LPs). While the majority of states now legally recognize LLPs as a formal business structure, Texas was the first state in the country to enact laws allowing this type of business formation. Below, our Houston business law attorney explains this type of business structure in further detail.

What is a Limited Liability Partnership?

When two or more partners want to start a business, an LLP is one option for a business structure. Partners in an LLP can be individuals or another entity. In most cases, professionals such as accountants and attorneys form LLPs. Although some states, such as California, restrict LLP formation to professionals, any partnership can form an LLP in Texas, regardless of its occupation.

LLPs are similar to limited liability companies (LLCs), so they are often compared to each other. Each of these business structures provides owners with limited liability, pass-through taxation, and flexible management structures. However, they also have important differences, such as the extent of the owner’s liability and the governing documents for each.

Benefits of LLPs

There are many different types of business structures, but LLPs have several benefits over others. These include:

  • Limited legal liability: One of the biggest benefits of forming an LLP is the balance between management control and reduced exposure to legal liability. As in a general partnership, partners in an LLP can actively participate in business operations. While general partners are not protected by limited liability, partners in an LLP are. LLP partners generally only risk the finances they invested into the company and are not personally liable for another partner’s mistakes. Still, partners in an LLP can face liability for their own negligence, debts, and wrongdoing.
  • Provides flexible management roles for partners: All partners in an LLP have a right to manage the business and can shape their own role pertaining to business operations. There is a great deal of flexibility in how partnerships are managed in an LLP. Partners can designate a managing partner to oversee business operations or they can divide duties up according to experience, expertise, or personal interest.
  • Relatively easy formation: Forming an LLP is relatively easy in Texas. For example, a general partnership in the Lone Star State can convert to an LLP. Forming an LLP requires you to complete a registration form and file it with the Secretary of State’s office.
  • Pass-through tax relief: Under the IRS rules, LLPs share the limited liability of a corporation while also avoiding the double taxation associated with corporations. Instead, LLPs are considered pass-through entities. Although the LLP is not taxed under federal law, the partners report their share of the company’s profits and losses on their own federal tax returns and pay the applicable taxes.

Drawbacks to LLPs

LLPs have many benefits for the partners involved in the business, but they also have some drawbacks. The first of these is that there is no uniformity across all states. In fact, some states do not legally recognize the LLP structure at all. Not only can this lack of uniformity make it more difficult to understand the laws in Texas, but it may also matter significantly if you want to operate in different states. Even if you do expand into other states that recognize LLPs, such as California, you may have to comply with different sets of laws, which can make business operations very confusing.

The protection from liability is also limited, as the name of these business structures implies. You may be found liable for another partner’s debts in some cases, whereas in other case,s you are not. If you hire employees, you may also be held vicariously liable for their actions. These factors can also make this type of business formation very confusing.

How to Form an LLP in Texas

A Houston business law attorney can help you through the many steps involved in setting up an LLP. They are as follows:

  • Choose a name: In Texas, the name you choose for your LLP must be unique. Decide on a name for your business and then check to determine if it is available with the Texas Secretary of State.
  • Designate a registered agent: You must select a registered agent who will receive official government and legal documents on behalf of the company. The registered agent must have a physical street address in Texas.
  • Complete Form 701: You must complete Form 701, the Application for Registration. Using this form, you must complete the name of the partnership, the principal office address in Texas, the federal tax ID number, and a statement of the company’s activity. You can complete a physical form and submit it to the Texas Secretary of State by mail, or you can file it online.
  • Apply for an EIN: You must also apply for an employer identification number (EIN) from the IRS. Even if the LLP does not have any employees, it must still obtain an EIN because they are a separate legal entity.
  • Draft a partnership agreement: You are not required to file a partnership agreement when forming an LLP. However, a written contract can outline the rights and responsibilities of each partner, outline their roles in business operations, and more. Perhaps most importantly, a written contract can outline how to resolve disputes if one arises in the future. A Houston business law attorney can draft an agreement that will offer protection to all partners.

Call Our Business Law Attorney in Houston Today

If you want to start a business and are considering an LLP, our Houston business law attorney can help. At Integrity Law Group, PLLC, our experienced attorney can review your goals for the company, advise you of the different structures available, and help you determine which one is right for your business. Call us now at (832) 384-5207 or fill out our online form to schedule a consultation and to learn more about how we can help.

Advantages of LLP Formation for Law Firms and Other Professional Services

Whether you are an attorney, doctor, or other professional, you must choose a business structure for your practice. Maybe you are just starting out and wondering what type of structure is right for you. Or, perhaps your current structure is no longer working for you, and it is time for a change. Whatever the reason that led you to consider the structure for your company, there are many reasons to consider a limited liability partnership (LLP). Our Houston business attorney explains what these are.

What is an LLP?

An LLP is a company established by two or more individuals or entities, known as partners. In most cases, LLPs are formed by a group of individual professionals. For example, four attorneys may decide to form an LLP and start their own law firm. There are many different types of professionals who choose to form an LLP, including:

  • Attorneys
  • Doctors
  • Dentists
  • Architects
  • Accountants

LLPs provide an alternative partnership structure to limited partnerships and general partnerships. Interestingly, Texas was the first state to create a law allowing the formation of LLPs, and approximately 40 states have now also adopted similar laws. While other states only allow LLPs for certain types of professionals, Texas law allows any group to use this business structure. This is very beneficial for many professionals, as LLPs have many advantages over other types of structures.

Limited Legal Liability

One of the biggest benefits of establishing an LLP is the balance of management control combined with limited liability exposure. As in general partnerships, LLPs allow the partners to actively participate when operating the business. Unlike general partnerships, however, LLPs provide partners with limited liability. Usually,  the partners in an LLP only risk the capital they have invested in the business. They are not at risk of being held liable for the mistakes of another partner. Still, partners in an LLP are liable for their own wrongdoing, negligence, and debt.

If a partner in an LLP fails to use reasonable care while conducting business, such as failing to supervise employees, and someone becomes hurt, that partner can be held liable for their negligence. As such, the negligent partner would be liable for personally paying damages. Under Texas law, LLPs are required to carry liability insurance.

Flexibility in Management Roles

Each partner in an LLP has the right to help manage the business. There is also a great deal of flexibility when shaping the roles of each partner in an LLP. This means that every partner has substantial freedom when determining how to manage the partnership. Partners can agree to delegate the daily operation of the business to a specific partner. They may also decide to assign specific duties based on a partner’s experience, expertise, and personal interest.

It is important to act proactively when forming an LLP to avoid confusion about the roles of different partners. A partnership agreement can outline the roles and responsibilities of each partner and create a framework in case there is ever a dispute. A Houston business attorney can draft your agreement and include all necessary provisions to protect all partners.

Relatively Easy Formation

Forming an LLP in Texas is relatively easy. Generally, partners need to only choose a name, file a Certificate of Formation, appoint a registered agent, file for registration, and obtain an EIN. While these are required steps, there are also recommended steps, such as drafting a partnership agreement. An attorney can help you through the process and make it even easier for you.

Tax Advantages

LLPs typically share the limited liability of corporations, but they also avoid the double taxation of a corporation. Instead, LLPs are treated as pass-through entities. As such, the LLP itself is not taxed as an individual entity under federal tax law. The laws allow the taxes to pass through the LLP to the individual partners who report their share of the company’s profits and losses on their individual tax returns. Owners of pass-through entities are often able to take advantage of the 20% pass-through tax deduction. Under this law, only 80 percent of your overall income is taxed rather than 100%, resulting in substantial savings.

Considerations Before Forming an LLP

While LLPs do have many advantages, there are also certain factors to consider before forming one. These are as follows:

  • Different laws in different states: The laws on LLPs vary significantly from state to state. Not all states even recognize this type of business structure. As such, if your company is going to operate in multiple states, you may not be able to register in all states as an LLP. 
  • Two partners are required: To form an LLP, there must be at least two partners. This means that if one partner dies, retires, or leaves the partnership for any reason, the LLP may have to be dissolved.
  • Costly insurance premiums: While partners are not required to carry liability insurance, it is recommended that all parties in an LLP have this type of coverage. Without it, a partner is personally liable for paying damages in the event of wrongdoing or negligence. The cost of insurance premiums can be high. Additionally, LLPs are required to carry a minimum amount of liability insurance of $100,000. These premiums can also be quite high.

While it is important to consider the above factors, there are ways to minimize the negative implications so all partners can reap the benefits.

Our Business Attorney in Houston Can Help with Your Case

There are many different types of business structures for law firms and other professionals in Texas. At Integrity Law Group, our Houston business attorney can advise on the different types of structures, help you determine which one is right for you, and guide you through the process so you can reap all of the benefits. Call us now at (832) 280-9197 or fill out our online form to schedule a consultation with our experienced attorney and to learn more about how we can help with your case.

Understanding Liability: Choosing the Right Business Structure for Your Company

As a business owner, you will have many important decisions to make. All of these decisions will have a significant impact on the company and will largely determine whether it is successful. One of the very first decisions you will have to make is how you want to structure the business. In Texas, there are four main structures to choose from. These are sole proprietorships, partnerships, limited liability companies, and corporations.

There are many factors to consider when choosing a business structure that is right for your company. Liability is one of the most important factors to consider. A Houston business attorney can explain further.

Sole Proprietorships

One of the most straightforward types of business structures is a sole proprietorship. Just as the name suggests, sole proprietorships have just one owner. You are not required to register the business with the Internal Revenue Service (IRS), although you can if you choose to. 

In fact, you do not have to file any government papers after starting a sole proprietorship. Some businesses start as a sole proprietorship and then change into another type of business structure. Others remain sole proprietorships for the life of the business.

As a sole proprietor, you will likely attach Schedule C, a Profit or Loss from Business form, to your personal tax return. This allows you to report any loss or profit from your business on your personal taxes.

Owners of sole proprietorships have unlimited personal liability for the business. This means that if you are a sole proprietor and your business is sued by a creditor, by someone who was injured on your business’ property, or by anyone else, your personal assets, as well as those of the business, are all at risk. 

On the other hand, you also have complete control over the business. It is unlikely that investors would invest in a sole proprietorship.

General Partnerships

General partnerships are owned by two or more people. As with sole proprietorships, you do not need to register a general partnership, and there are no government filings. However, due to the fact that there is more than one owner, drafting a partnership agreement is very important. 

A partnership agreement outlines the rules for sharing profits and losses, outlines the percentages of ownership, describes the rights and responsibilities of each partner, and provides terms of dissolution in the event that one partner passes away, retires, or simply wants to leave the business. A Houston business attorney can ensure a partnership agreement is drafted properly and includes all important terms.

Partnerships report taxes, but they do not pay taxes. Profits, as well as losses, are passed through to the owners. The owners then pay their own share of taxes with their personal tax returns. Like in sole proprietorships, all partners have unlimited personal liability with this type of business structure.

Corporations

There are two types of corporations. These are S-corporations and C-corporations. Corporations are separate legal entities from their owners and operators. Corporations can enter into contracts, but they also have very specific responsibilities, such as paying taxes for the corporation. 

Ownership in corporations is established by issuing stock shares. Corporations are established when a certificate of formation is filed. Once the certificate is filed, the corporation can then determine whether it wants to be covered under Subchapter S or Subchapter C.

Due to the fact that both S-corporations and C-corporations are separate entities from its owners and shareholders, the business files its own tax return. After shareholders receive their distribution of profits from the corporation, they must then report them on their taxes and pay any taxes on them. 

For the purpose of federal taxes, corporations pass losses, income, credits, and deductions on to shareholders. This avoids double taxation when the shareholders report the profits they received.

Also due to the fact that corporations are separate legal entities from the shareholders and owners, the business has all liability. Owners and shareholders cannot be sued, nor are their personal assets at risk if the company is facing a lawsuit.

Limited Liability Corporations (LLCs)

Limited liability corporations, commonly referred to as LLCs, are a combination of sole proprietorships or general partnerships and corporations. The owners of LLCs are referred to as ‘members.’ Individuals, foreign entities, corporations, and other LLCs can all act as members of an LLC.

LLCs are considered as pass-through entities for tax purposes. As such, any income obtained by the business passes through to the members of the business. Members are then required to report losses or profits on their own individual tax returns, as in general partnerships.

To establish an LLC, the person incorporating the business must file a certificate of formation, and a filing fee must be paid. It is also recommended that an LLC agreement be drafted. 

Like in general partnerships, the agreement sets forth the distribution of losses and profits, the rights and responsibilities of the members, buy-sell provisions, how management is structured, and the ownership interests and voting power of each member.

One of the biggest drawbacks of LLCs is that members are sometimes subject to additional state taxes. On the other hand, LLCs are also separate entities from the members. This means that if the LLC is sued, only the business assets are at risk. Members do not have to risk their own personal assets in order to have ownership of the business.

Our Business Attorney in Houston Can Help with Your Structure

Choosing the right business structure for your company is one of the most important decisions you will make, but it is not easy. At Integrity Law Group, PLLC, our Houston business attorney knows how to help you choose the structure that is right for you and your company. 

We will also be by your side as your business grows, shielding you from liability and providing the protection you need when facing a legal battle. Call us now at (832) 280-8874 or fill out our online form to schedule a consultation with our experienced attorney and learn more about how we can help.

Navigating Business Contracts: Tips for Successful Negotiations

Contract negotiations can be time-consuming processes that have the potential to become frustrating for all parties. One reason for this is that parties sometimes enter into these negotiations without a clear vision of their priorities and objectives. This lack of focus can result in miscommunication among the parties, unnecessary contract cycles, and unfavorable outcomes. 

Fortunately, there is a way to avoid these obstacles. If you start the negotiation process by focusing on your preferred outcome, you can actually gain a competitive advantage. Below, our Houston business law attorney explains how to make the most out of your negotiations.

Start With a Positive Outlook

Contract negotiations should not be a battle. In fact, the best contracts are negotiated when the two sides involved can come together and work collaboratively. Start any contract negotiation by showing appreciation for the other side and what they have to offer. Find the terms that you can agree on and set a positive tone for the process. This can help ensure that both parties’ interests are met.

Begin With a Draft

Before drafting a formal contract to negotiate with the other side, you should start with a draft. Make sure that you and the other side both agree to the main terms of the agreement. Use a term sheet that is straightforward in order to keep things as simple as possible. If it becomes too complex at any point, start from the beginning once again and work on creating new terms.

Break the Contract Down

It is not realistic to expect the other side to agree to large portions of a contract. This is an all-or-nothing approach to negotiations, and it simply does not work. Instead, break the contract down into smaller portions that can be negotiated separately. Once these smaller portions have been agreed to, they will then form the larger contract.

Simplify the Initial Terms

Contract negotiations become much more complicated when the terms are nuanced, or the agreement contains too much detail. While complex contracts do have some nuanced advantages, it is typically best to begin with terms that are clear and simple so everyone involved fully understands them. This will ensure that even if all parties are not yet in agreement, they at least understand the terms to negotiate without becoming overwhelmed.

Understand Why You Want to Work With the Other Party

Too many people assume that they have to be aggressive during contract negotiations. With this mindset, it is difficult to be flexible, and can actually work against you if the other side believes you are being too demanding. While there is nothing wrong with being assertive to ensure you are being treated fairly, it is best to set aside the competitive mindset during negotiations. Instead, prioritize working collaboratively so you can reach an agreement that serves everyone. Being represented by a Houston business law attorney can help you work with the other side in a professional manner.

Identify Your Top Priorities

You should never enter into contract negotiations without first identifying your top priorities. It is critical that you understand the terms you most want to get out of the agreement. After you have identified these priorities, you can then start to consider the other rewards and risks you may face once your initial priorities are fulfilled. Without first identifying your most important priorities, you really do not have a starting point.

Understand the Other Side’s Goals

Just as you have goals when entering into contract negotiations, so too, will the other side. Before you even begin negotiating, it is important to have an understanding of the other side’s goals and interests. Ask the other side questions to gain a better understanding of their needs and goals. This can allow you to negotiate in a manner that will support the needs of your company while also allowing the other side to meet their goals as well.

Conduct Research

The best contract negotiations are based on facts and not personal feelings. The more facts you have to support your needs, the stronger position you will be in during negotiations. For example, if you are a pest control service provider, you may bring research to the table that shows the service is most effective when done at certain periods. If you cannot find research to support your needs or the terms you would like, using testimonials from previous clients can also be helpful.

Do Not Become Emotional

Contract negotiations can feel personal, particularly if you are very passionate about obtaining certain terms. However, it is critical to remember that contract negotiations are not personal. They are all part of business operations. As such, it is important that you do not become emotional. Instead of making statements such as ‘I feel,’ or ‘I think,’ focus on the facts and allow those, and not your emotions, to guide you.

Do Not Rush the Process

It is important that you take your time not only during negotiations, but before and after them, as well. Carefully conduct research that supports your side, and prepare any documents you may need well in advance of any negotiations or meetings. Throughout the process, do not make any hasty decisions but instead, consider your options carefully and consult with your attorney about which one is best for you. Once negotiations have wrapped up, follow through with any deliverables required of you and answer any questions that still remain.

Work with a Business Law Attorney in Houston

Contract negotiations can feel intimidating and overwhelming, even when you are very familiar with the process. It is for this reason that it is so important to work with a Houston business law attorney. At Integrity Law Group, PLLC, our seasoned attorney can provide the legal representation you need, answer your questions throughout the process, help you identify your goals, and ensure that you receive the best possible outcome. Call us today at (832) 280-9576 or fill out our online form to schedule a consultation with our experienced attorney and to learn more about how we can help with your negotiations.

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.

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