Texas Business Dispute Blog

This is part 2 in our series of tips for new investments. In part one; we discussed the disadvantages of using standard form documents to govern the new investment or business. Now in tip #2, we are going to talk about the role of attorneys in the process.

The disadvantage of hiring one attorney to represent a group of investors.

Attorneys are supposed to represent the client that hired them and give that client their devotion and loyal advice.

It’s a new year and perhaps a new time for creating a new business venture or investing in a private business opportunity. It’s a complicated decision. If you are putting money into an opportunity you have to analyze and understand the business plan, the management of the company, the marketplace, and your fellow owners. If you plan to put sweat into the business by working as an officer or employee you have to do all those things plus accept the pressure of generating enough money to pay your salary and those of any other employees. Unless you have a lot of experience or invest professionally, what you are not likely to do is spend a lot of time on the documents that form the company and govern its operations.

If you invest in ownership in a Texas corporation, limited liability company ("LLC") or Texas limited partnership ("LP"), and get shut out or suspect some act of mismanagement, the right under the Texas Business Organizations Code to ask for documents is an essential protection.

But until the 2017 Texas legislative session, if the business refused an owner’s demand for documents, only a shareholder in a corporation could seek recovery of attorney's fees and other expenses for having to go to Court to force the entity to turn over documents, while LLC and LP investors had no right to attorney’s fees.

In 2017, the Texas legislature leveled the playing field by amending the Texas Business Organizations Code to allow both LLC members and limited partners to recover attorney's fees when the business refused to give them documents. Given the increasing use of LLC and LPs for newly formed private companies, this is a much-needed protection.

Most private company investors are not tax experts, but developing a working knowledge of the potential for the business to generate phantom income is critical to avoiding unwelcome, tax consequences.  What is phantom income exactly, and why does it matter?  This Blog post focuses on answering that question to avoid ghoulish tax surprises appearing after Halloween.

Couples often spend months planning their wedding day details, from the color of the flowers to the icing on the cake.  What they often overlook, however, are the legal rules that will govern their property once they are married.  While the topic lacks romance, couples should seriously consider the benefits of entering into a pre-nuptial agreement, which will impact them, and potentially their children, far beyond their wedding day.

This is the second in a two-part series focusing on pre-marital agreements, or pre-nups. Part 1 considered how a pre-nup can help a couple address a number of crucial financial and personal issues.

Not so long ago, marital pre-nups were viewed as devices solely for use by the rich and famous, who never seemed to stay married for long.  In today’s world, however, couples from all walks of life face a myriad of important financial and personal issues that a pre-nup can help them to address.  Pre-nups can benefit both spouses, including by:

• Preventing costly, drawn out divorce litigation;
• Protecting a spouse’s interests in a business;
• Preserving valuable family assets, real property and heirlooms;
• Assuring the inheritance rights of spouses and children;
• Shielding one spouse or children from creditors; and
• Giving peace of mind to the couple by reducing uncertainty about the impact of major life events in the future.

This is a two-part Post focusing on marital pre-nups.  Part 1 evaluates how a pre-nup can address important critical business and family issues for the couple.

Since 2014, Energy Transfer Partners LP (“ETP”) has been fighting to hold on to the $535 million judgment it obtained that year against Enterprise Products Partners (“Enterprise”).  Our blog post earlier this year analyzed ETP’s efforts to persuade the Dallas Court of Appeals that ETP and Enterprise, two sophisticated companies in the energy industry, had entered into an unwritten partnership agreement, or as Enterprise referred to it on appeal – a partnership by ambush in disregard of the parties’ written agreements.

Looking back on the celebration of Independence Day this week, one of history’s most notable separations, it may be a good time for business partners who are locked in conflict to consider a business divorce.  Unlike the fight to the death between the redcoats and the patriots, however, the focus of a business divorce is how to structure a separation between business partners that achieves a win-win outcome for both sides.

In its simplest terms, a business divorce refers to the process by which the owners of a private business separate from their co-owners.   This Post discusses issues common to most business divorces that will be helpful for business owners to consider before they embark on this process.  The perspective in the Post is from the vantage point of the minority owner seeking to negotiate favorable terms for his/her exit from the business.

Based on our personal experience handling Business Divorce matters for both majority owners and substantial minority investors in private companies, we have learned firsthand that there are two sides to every story and every Business Divorce matter is unique.

Life is all a about second chances.   In the business world, minority investors may feel that they are trapped if they failed to obtain a buy-sell agreement before investing and have no contractual right to exit the company.  This situation is common in family businesses when the minority owners did not request their grandparents, parents or other family members to provide a buy-out right at the time the company was formed.  Fortunately, all hope is not lost for minority investors who did not obtain a buy-sell agreement before they obtained their stake in the company.  This post explores ways minority investors may secure a buy-sell agreement with majority owners even after the investors acquired their minority ownership interest in the business.

The season finale of the hit reality TV show The Bachelor attracted more than 8 million viewers. My wife and teenage daughters help make up this devoted fan base, and watch every episode. Yet, when I question them about whether the subject of a pre-nup agreement has ever come up on the show, I get eye rolls, and comments like, “Dad, don’t be such a downer.”  Assuming that the Bachelor and his new fiancé do make it to the altar, however, the show also does not mention that