Areas of Practice
The foundation of any business transaction is a solid agreement that accurately and clearly reflects the parties’ wants, needs and desires. Holt Law Firm has been setting up businesses and providing a suite of affiliated legal services for more than 19 years. Our attorneys represent established enterprises, entrepreneurs, and small business owners in a range of proactive and responsive matters. We also work with businesses and individuals to provide counsel and service including estate planning, asset and stock purchase and sale agreements, real estate transactions, employment matters, as well as general civil litigation matters.
We advise clients on the structure, formation, and operation of business entities like corporations, Limited Liability Companies and partnerships. We can advise business owners and executives against risks and exposures and can help by properly forming the initial entity structure and preparing the internal agreement that governs the operations of the business and the relationship between its owners.
Complex Business Transactions
Sustainability is a goal of every successful business – even more so in today’s challenging economic climate. Whether structured to be a Limited Liability Company (LLC) with multiple owners, corporation, sole proprietorship, or a partnership between two people, one of the most critical factors in success is to come up with a good plan before starting a business. Your best option in forming a business is to involve a knowledgeable attorney to help pilot the crucial first steps in a complicated process. Using an attorney to help secure financing, executives and other foundational company elements offers the best chance to succeed.
Two of the most common reasons for mergers and acquisitions (M&A) are to grow income and market share. In some cases, a deal of this type is needed to survive the competition. In other cases, the business environment and your position in the market may allow you to be the aggressor and take over the competition.
In a merger agreement, the company owners of two or more businesses agree to combine their companies in an attempt to expand their reach, gain market share, and reduce the cost of operations.
Unlike mergers, acquisitions are technically purchases whereby a more profitable company decides to buy most or all of a company’s shares in order to gain control of that portion of the company.
Consolidation is an M&A agreement that creates a new company with all the assets, liabilities, and other financial entities of the responsible parties that combines talents, increases profitability, and transforms competing firms into one enterprise.
At Holt Law Firm, we focus on assisting clients in understanding the deal terms of a transfer of ownership, including provisions found in nondisclosure agreements, letters of intent, and asset and stock purchase agreements.
Whatever the motivation, look to us for guidance on all phases of a purchase, sale or merger transaction. We approach transactions as a collaborative effort with the client, with a view toward achieving the client’s legal and economic goals.
We assist businesses to structure and negotiate key relationships with employees, suppliers, distributors, sales representatives, and customers. From master services agreements to independent sales representative agreements, we collaborate with clients throughout the negotiation process to the contract’s execution.
Restrictive or non-compete employment agreements that were once reserved primarily for executives are now being used by Texas companies across a broad range of organizational hierarchies. Once common only in top managerial positions for large companies, small businesses are now using these agreements for employee classifications such as engineers, sales representatives, medical technical assistants, and many other positions.
Our firm represents both individual employees and companies in noncompete law. We have the expertise to help employees faced with signing an employment contract with noncompete language prior to taking a job or upon accepting a severance package. We can also help employers operating in today’s competitive environment, where it is often critical to prevent employees from working for a competitor or forming a competing business. While Texas law has shifted to provide some favor on these types of agreements, Texas has strict laws as to what qualifies as a valid noncompete agreement. Advice from a knowledgeable attorney is critical for businesses considering options in this area.
Asset and Stock Purchase / Sale Agreements
The purchase or sale of a business is a serious undertaking that needs to be done right the first time. Errors in judgment and mistakes can be costly, so it is essential to have the advice of an experienced attorney who knows what to look for and how to structure the deal, so the closing of the transaction yields the financial benefit and control you seek and with your future legal risks minimized as possible.
We have extensive experience in facilitating smooth outcomes for our clients regarding the purchase and sale of businesses. We can help you maximize your upside and reduce risk concerning:
- Asset and stock purchase agreements
- Family businesses and closely held businesses
- The drafting and negotiation of contracts
- Asset and stock purchase/sale agreements
If buying or selling a business, you can buy or sell stock in the company, or you can buy or sell the company’s assets. There are reasons for going each route. Either way, you should know exactly what you are buying or, if you are the seller, you should know what you will receive from the buyer, when and how you will be compensated, and what liabilities or problems you inherit. All these issues require thorough, intelligent legal counsel.
Business Entity Formation (LLC, etc.)
Selecting the appropriate business operating structure according to the specifics of the owners and business is critical to achieving the maximum liability shield, tax benefits, and business efficiencies. It is also important that formation documents be customized to achieve maximum benefit as well. A well drafted ownership agreement for a Limited Liability Company, corporation or partnership helps ensure ownership expectations are clear and minimize the likelihood of potential disputes.
The Texas Limited Liability Company (LLC) is currently the most prevalent and popular entity formed by small businesses. Benefits to operating a business through an LLC include minimizing personal liability, flow-through taxation, some degree of anonymity, greater asset protection, and business credibility. The LLC form allows its owners to achieve the desired liability protection while benefiting from pass-through tax treatment without the restrictions that exist with the S Corp form.
Forming an LLC according to the specifics of the owners and business is critical to achieving the maximum liability shield, tax benefits, and business efficiencies. It is also important that formation documents be complete and customized to achieve maximum benefits as well. Some of the benefits to using a lawyer to form an LLC include:
- Advice on Maximizing Asset Protection
- Attorney Service as Organizer
- Customized Company Agreement
- Advice on Transferring Assets to LLC
- Advice on Structuring Accounts and Finances
- Follow Up Consultation After LLC Formation
While it is true that some consumers will be able to successfully use form websites to create an LLC that will be approved by the Secretary of State, failure to consult with a business attorney about customized formation documents can have serious negative consequences.
One of the preferred holding entities for Texas real estate and business assets is the Texas Series Limited Liability Company (LLC). The Series LLC, as opposed to a traditional limited liability company, allows investors and business owners to hold assets like real estate or businesses in separate Series – a subgroup company within the primary LLC. Each subgroup company can have its own assets, liabilities, managers, members, and rules for operation.
The primary benefit of the Series LLC is the ability to limit the exposure of assets to a particular Series. Should any Series face liability, then the exposure is limited to assets in that particular Series.
Investors with multiple real estate properties and/or businesses are prime candidates in forming a Texas Series LLC for simplicity, economy, and liability protection.
A corporation is a legal entity that can sue, be sued, enter into contract agreements, and conduct business on its own behalf. When owners incorporate their business, they obtain a level of protection between themselves and the business, and unlike a sole proprietorship and a general partnership, owners are shielded from personal liability.
There is substantial paperwork involved in creating a corporation, including a state-required certificate of formation and various documents including bylaws and shareholder agreements. The required paperwork is not simple and should be taken very seriously. It is important for an entity that wants to incorporate their business to seek legal advice from an experienced attorney.
A legal structure for a corporation in which the owners, or shareholders, are taxed separately from the entity is known as a C Corporation (C Corp). C Corps are the most prevalent of corporations and are also subject to corporate income taxation. Profits from the business are taxed at both corporate and personal levels, leading to what is commonly known as double taxation.
C Corps pay corporate taxes on earnings before distributing their profits to the shareholders in the form of dividends. Individual shareholders are then subject to personal income taxes on the dividends they receive. Although double taxation is undesirable, the ability to reinvest profits in the company at a lower corporate tax rate is an advantage.
Other characteristics of a C Corp include:
- A requirement to hold at least one meeting, with official minutes, each year for shareholders and director
- Documented voting records of the company’s directors and a list of the owner’s names and ownership percentages
- Copies of the company bylaws on the premises of the primary business location
- Filing annual reports, financial disclosure reports, and financial statements
The size and type of business help determine which type of corporation best suits the needs of that business. For many businesses, an S Corporation (S Corp) is the best option.
Once the corporation is approved by the state, filing a form with the IRS is the next step toward establishing an S Corp. Like other incorporated businesses, S Corps offer protection to the company owners in the event of a lawsuit because the company is liable as opposed to the owners themselves. An important distinction between an S Corp and a C Corporation (C Corp), and a major benefit of electing S Corp status, is the fact that income and losses “pass through” to shareholders, allowing them to avoid double taxation.
S Corps have limitations including:
- No more than 100 shareholders are permitted in an S Corp, making them best for smaller companies
- Shareholders must be U.S. citizens
- Certain businesses, such as banks, credit unions, or insurance companies are not permitted to become S Corps
- Businesses that make 95% or more of its income from exports are not permitted to file for S Corp status
- S Corps are prohibited from having classes of stock with different distribution rights
- All distributions to shareholders in an S Corp must be proportionate to the percentage of stock owned by each shareholder
Professional Corporations are made up of people licensed in the same profession. In Texas, professional corporations are comprised of groups such as architects, attorneys, certified public accountants, dentists, and veterinarians. All professionals within a professional corporation must be properly certified or licensed by the state of Texas. A certificate of formation must be filed with the Texas Secretary of State defining the management structure, the type of professional service offered, and the type of professional corporation.
Similar to a general corporation, a professional corporation limits personal liability for debt and business claims. A professional corporation is also like a general corporation in that it can function as an S Corporation to avoid double taxation where tax terms are for both business income and personal income from the corporation.
When two or more people come together to form a business for profit in Texas, a general partnership is created. This type of business is generally operated with a partnership agreement, but it does not have to be in writing and no state filing is required. As with a sole proprietorship, there is no limit to the liability of both partners. While there is no requirement for a written partnership agreement for a general partnership, it is not wise to pursue a business venture in this way.
It is the opinion of Holt Law Firm that no person should ever engage in general partnership without first having a detailed conversation with a competent business lawyer who can provide specific advice on the potential negative characteristics this entity type carries.
A limited partnership is formed by at least two people with at least one general partner and at least one limited partner but is not to be confused with a general partnership or a Limited Liability partnership. The general partner in the partnership manages the business and has unlimited liability for all business decisions and any debt incurred. As implied, limited partners have limited decision-making ability and their financial liability is limited to no more than the amount of their investment through a partnership agreement.
Some of the advantages to forming a limited partnership instead of a general partnership – especially for limited partners – are:
- Raising capital is easier without borrowing money from banks or other lenders
- While partners within a general partnership are liable for debts and obligations of the partnership, limited partners are liable only for the amount of money they’ve invested
- Because liability is limited, limited partners may use this type of partnership as an investment opportunity
- A limited partnership can increase capital through investments by limited partners without increasing debt, which often appeals to a greater number of investors
- A limited partnership is not subject to double taxation
A family limited partnership (FLP) is an arrangement in which family members pool money to run a business project. Each family member buys units or shares of the business and can profit in proportion to the number of shares they own, as outlined in the partnership operating agreement.
FLPs have two types of partners – general and limited partners. General partners are responsible for day-to-day management tasks. The general partner may also take a management fee from profits if outlined in the partnership agreement.
Limited partners have no management responsibilities. They instead buy shares of the business in exchange for dividends, interest, and profits the FLP may generate.
Like a limited partnership, the individual partners of the entity share profits according to their proportion of shares in the partnership. Thus, when the partners of the limited partnership are members of the same family, there is an opportunity to use the family limited partnership for estate planning purposes.
The most basic and simplest type of small business in Texas is a sole proprietorship, which allows a person to legally engage in business activity in Texas without the need to establish a formal entity with the Secretary of State. Starting a business as a sole proprietorship doesn’t require a person to file any special paperwork or pay fees, but the need for a lawyer may still be necessary to identify personal exposure to any liabilities the business may encounter because the person and business are essentially the same. In addition, a sole proprietor may want or need file an assumed name certificate if the name they use in business would be different than their legal name.
In the vast majority of cases, a sole proprietorship is not a desirable business form because the sole proprietor is personally fully exposed to all liabilities of the business.
Real Estate Transactions
Legal documents can be dense, complex and tough to interpret for someone unfamiliar with real estate law. A real estate lawyer will make sure you understand these documents and identify any necessary changes to ensure your interests are protected.
As with most areas of the law, it is best to involve an attorney to represent your interests as early in the process as possible. Some areas where a lawyer’s skill could benefit you are:
- Explaining real estate laws and regulations
- Resolving title defects
- Negotiating terms that are more beneficial to the client
- Drafting the purchase contract
- Reviewing your purchase agreement
- Assisting in handling the details of closing
- Representing you in court, if necessary
- Reviewing title commitments, surveys, and other documents
Business Litigation
Our goal in all areas of practice is to be as proactive as possible to eliminate as many areas of potential conflict as possible. The simple fact of the matter, however, is that no amount of planning can remove all potential future conflicts. At times, litigation is necessary in order to protect or enforce the rights of a client. Whether it is the result a business partnership that has reached its end and it is time to part ways, or if you have delivered on your obligations but the other party to your transaction refuses to do the same, Holt Law Firm is available to make sure your rights are protected and that you get the benefit of your bargain to the maximum extent possible.
Estate Planning (Wills, Trusts, etc.)
Having an estate plan in place has dual roles in helping to protect what matters most and supporting an efficient wealth transfer, while also easing a burden that may be placed on family and survivors. Without a plan, family members or beneficiaries may be left trying to piece together a deceased’s financial affairs, which may be difficult, time consuming, stressful, and even messy for the family. Among the complexities to navigate are the impact of taxes on assets controlled by an individual at death, along with potential legal fees that may be required to settle the estate.
These are just some of the financial issues we help clients plan for and resolve:
- Providing clarity and guidance to an Executor or Trustee carrying out your estate plan
- Dealing with debts owed to you by a beneficiary
- Minimizing estate and income taxes
- Avoiding the cost and delay of probate court
- Transferring interests in a business
- Making gifts of special items, such as heirlooms, art or collections
- Making charitable gifts in a tax efficient way
Distributing property and assets is the primary function of an estate plan, but an estate plan can also serve to:
- Avoid family conflict after you’re gone
- Treat children in different circumstances fairly
- Protect a beneficiary’s inheritance from divorce and other creditors
- Balance the interests of a second spouse and children from a previous marriage
- Maintain a disabled beneficiary’s eligibility for benefits
- Provide for the care of pets left behind
Proper estate planning can lessen a family’s emotional burden in the wake of a loved one’s death.
A Will, also called a Last Will and Testament, allows a person to give property and other assets to specific people or organizations as well as naming an Executor to settle the affairs of the estate. Without a will, a person’s belongings will be distributed according to Texas law, which may not be desirable.
Often a will is the best solution for estate planning purposes. Unlike many states, the Texas Probate process is very efficient and cost effective making the use of wills in Texas very desirable. While a simple will can suffice for most estates, Texas law allows for the creation of wills that can aid in tax planning and include built in trusts. Some of the reasons a person would want to create a will include:
- Appointment of guardians for minor children
- Control over asset distribution after death
- Avoid real estate related complications
Probate
When there are no disputes regarding the will and the will is a valid original, Texas has one of the most simple and inexpensive probate processes in the country.
An executor is commonly named in the will – or an administrator if there is no will – to complete the probate process. This involves collecting the deceased’s assets to pay any remaining liabilities on their estate and distributing the assets to beneficiaries.
In most cases, a will can only be probated within four years of the date of the decedent’s death. The named executor in the will usually hires an attorney to perform the probate, the attorney files an application for probate and then files the original will with the court. A hearing is set in which the will is proven to be valid before the court. The court will then issue “Letters of Testamentary” that allow the executor to act on behalf of the estate.
Holt Law Firm will probate where the decedent left a will for affordable flat rates when there are no complicating factors. Simple testate probates usually involve a named independent executor with a valid, original will.
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