Business Law

When starting a business, it is vital to have the proper legal documents in place to ensure your operations are both legitimate and protected. Navigating the various legal requirements from the outset is crucial for building a strong foundation for your business. As your business evolves, many of these documents will need to be reviewed and adapted to meet your growing needs. Key legal documents include:

• Business Plan
• Partnership Agreements
• Incorporation Documents
• Operating Agreements (for LLCs)
• Employee Contracts
• Licenses and Permits
• Non-Disclosure Agreements (NDAs)
• Vendor and Client Contracts

Having these legal documents properly drafted and implemented from the start will safeguard your business and position it for long-term success.

A Limited Liability Company (LLC) is a versatile business entity that combines the liability protection of a corporation with the tax advantages of a partnership. An LLC can be owned by one or more individuals, known as “members,” and offers flexibility in how it is managed. The LLC can either be managed by its members or by a designated manager, allowing for a customized management structure tailored to the needs of the business. LLCs are especially popular among small and medium-sized businesses due to their flexible ownership and management options, as well as the limited personal liability they provide. Therefore, if an LLC is properly structured and maintained, its owners are generally not personally liable for the company’s debts and obligations.

Forming a Limited Liability Company (LLC) offers several key advantages, notably protecting personal assets while providing operational flexibility. When properly structured, an LLC shields you from significant financial risk. Key benefits include:

• Limited Liability Protection: LLC members are shielded from personal liability for the company’s debts and obligations. Their financial exposure is limited to the amount invested in the business, safeguarding personal assets such as homes and cars.
• Pass-Through Taxation: An LLC is a pass-through tax entity, meaning profits and losses are reported on the owners’ personal tax returns, avoiding double taxation.
• Tax Flexibility: LLCs can elect to be taxed as a corporation or retain pass-through taxation, offering flexibility to adapt to business needs.
• Ease of Formation and Maintenance: LLCs are simple to form and maintain, with fewer formalities compared to corporations. There is no requirement for regular shareholder meetings or extensive record-keeping.
• Flexible Management: LLCs offer a customizable management structure, allowing members to manage the business directly or appoint a manager, with no restrictions on the number of owners.
• Enhanced Credibility: Forming an LLC lends credibility to your business, reassuring clients, suppliers, and stakeholders of its legitimacy.

Forming a Limited Liability Company (LLC) is a popular choice for new businesses, offering liability protection and operational flexibility. To ensure legal compliance in Texas, follow these steps:

• Choose a Business Name: Select a unique name that complies with Texas LLC naming rules. The name must distinguish your business and typically include “Limited Company” or “LLC.”
• File a Certificate of Formation: Submit a Certificate of Formation to the Texas Secretary of State, providing basic information about your LLC, including its physical and mailing addresses, and the names of the governing members.
• Create an Operating Agreement: Although not required by Texas law, an LLC operating agreement is essential. It outlines the ownership, management structure, and operational procedures of your LLC, helping avoid default state laws in case of a dispute.
• Obtain an EIN: Secure an Employer Identification Number (EIN) from the IRS. This number is essential for tax purposes, opening a business bank account, and hiring employees.

A trademark is a distinctive symbol, word, phrase, logo, or design used to identify and distinguish the goods or services of one entity from those of another. It serves as an indicator of the source of a product or service and helps protect consumers from confusion. Trademarks can be established through common law usage or formally registered with the United States Patent and Trademark Office (USPTO). If a trademark is used without authorization, the trademark owner may need to pursue legal action for trademark infringement or dilution to protect their intellectual property. Additionally, if a trademark is deemed “merely descriptive” of the product or service, it may not be eligible for full registration. 

This is a common area of litigation, typically arising when one business extends goods or services to another on credit, and the invoices remain unpaid. When amicable resolution fails, litigation may become necessary to recover the outstanding debt. The first step is to gather all relevant written communications and documentation exchanged between the parties. Subsequently, a formal demand letter is sent, outlining the breach and specifying the actions required to resolve the issue. If settlement negotiations are unsuccessful, the party seeking payment can initiate a lawsuit. In such cases, a “sworn account suit” is often filed, wherein a representative of the creditor company swears to the accuracy and validity of the invoices. This compels the debtor to file a sworn response, contesting the debt if they believe it is unwarranted.

For corporations with multiple shareholders, a buy-sell agreement is highly advisable. Events such as a shareholder’s death, divorce, disability, or termination of employment can pose significant challenges for the corporation and its remaining shareholders. A well drafted buy-sell agreement helps mitigate these risks by ensuring a structured and orderly succession process. Similar provisions are also recommended for partnerships to address potential disruptions and maintain business continuity.

Visit our Resource Center designed to provide valuable insights and education to help your business thrive. Empower yourself with the knowledge needed to navigate today’s complex legal landscape.