The SBA Suggests 10 Key Steps for Starting a New Business

Once you’ve decided to start a new business, it can be tempting to simply moved forward with various tasks as they come to mind. While this may work for a few entrepreneurs, it’s always best to create an organized plan of action so you won’t waste time and cause problems for yourself that could easily have been avoided.

Fortunately, the SBA (Small Business Administration) provides excellent online materials that can help you plan the most useful way to start a new company – or expand the current reach of an existing one. Here’s a brief review of the ten important tasks that should normally be addressed first as you launch a new business.

The key steps for creating a solid foundation for your new business

  1. Decide where to locate your company. Prior to starting any market research, you’ll need to look at several cities to decide upon the best location for your business. This decision must be partly based on if you’ll be selling goods and services to your customers from a brick-and-mortar storefront or office – or if you’ll just be contacting potential customers on the phone or over the Internet. Be sure to select a location where many well-qualified job applicants live – as well as a city and state with reasonable business taxes;
  1. Develop a reliable market research plan. Once you’re certain about the goods or services your new business will sell, you must conduct market research to verify that there’s a definite need for what you’ll be selling in a specific location. This activity also involves identifying your potential customers and all known competitors; 
  2. Create a viable business plan. Most people starting a new business choose between a traditional business plan or a lean one for a basic start-up company. If you need to borrow money to finance your company, you’ll almost certainly have to provide a lender with a traditional business plan.

The traditional plan is normally very comprehensive – it describes your specific goods and services, provides a mission statement about what you seek to accomplish in the long run and names the initial team of professionals who will be running the company. It also states where the business will be located and how many employees you’ll need to hire. A traditional business plan should also describe the business structure you’ll be using, who will be handling specific tasks – and it should review your market analysis. Initial financial projections or earnings for the company should also be included.

In contrast, a lean start-up business plan may simply describe your goods and services, provide a statement about who will be running the company and state who you believe will be your most likely customers. It should also contain information about how you’ll initially finance the company and where it will be located;

  1. Make sure you have enough initial funding for the company. You and your business partners or advisors must determine how much money you’ll need to start your business. If you cannot raise this money among your business partners, then may have to try and obtain funds from venture capitalists or request a small business loan from a bank or through SBA resources. Other options include raising capital through crowdfunding or other online resources;
  2. Select the best business structure for your company. While many people run sole proprietorships if they’ll be handling all of the major company tasks themselves, others choose between forming such structures as partnerships, limited liability companies (LLCs) — or some type of corporation or cooperative;
  3. Decide upon the best name for your company. It’s a good idea to brainstorm with your partners or investors since you want to try and choose a name that clearly reflects the nature or “brand” of your business – as well as its spirit. Be aware that one of your first tasks will be to make sure the name you select is original and that it’s not already being used by anyone else;
  1. Be sure to register and protect your business name. After you’ve chosen the best name for your company, you’ll need to take steps to protect that name by properly registering it. Keep in mind that you may also need to register any trademark you’ll be using. Since additional ways of protecting your company name may also be required, you should always discuss this topic with your Houston business law attorney;
  2. You must request state and federal tax IDs. You will need to obtain an EIN (employer identification number) for many reasons. For example, you must have an EIN to open a bank account for your company and to pay taxes (among other tasks). Depending on the different states where your company will be operating, you may also need to obtain one or more state tax IDs;
  3. Obtain all required licenses and permits. Your specific type of business activity and where you’ll be working will determine the types of permits and licenses you must obtain, if any;
  4. Be sure to open one or more business accounts for your company. These most often include checking and savings accounts, credit card accounts and a merchant services account. Depending on the nature of your business and its initial size, you may be able to simply start with a checking account and then open other accounts as the need arises.

Please feel free to contact one of our Murray Lobb attorneys for legal advice as you address any or all of the various steps named above while starting a new business. We’ve had the opportunity to help many clients establish a wide variety of successful businesses in the past and are prepared to provide you will all the guidance you may need.

Designating a Guardian for Your Children in a Will

If you’re a parent with children who haven’t yet reached the age of majority, you need to create a Will that designates a guardian to step in and look after them if you suddenly pass away. If you fail to provide for your kids in this manner, a court will usually appoint someone to serve in this role – especially if your former spouse is deceased or incapable of handling this responsibility.

A list of traits and abilities a responsible guardian should have are set forth below. If your children have entered their teens at the time when no parent remains alive to care for them, the courts will normally consider their preferences for a guardian at that time.

What are some key considerations when choosing a guardian for your children?

  • It’s often best to choose someone already known to your kid(s) or who has a definite gift for caregiving. This might be one of your parents, a sibling or a very close and trusted friend. Always be sure to obtain this person’s advance permission to name him (or her) in your Will before doing so. If you prefer, you can also designate a married couple as co-guardians;
  • If possible, try to choose a person who already lives in the same city as you — or who is willing to relocate there in the future. It can be very comforting to children if they’re allowed to remain in their same school district. If you can’t find someone who lives nearby, be aware that it may prove a bit expensive for an out-of-state guardian to handle legal matters for the children in a different state. Choosing a local guardian can prevent this type of problem;
  • Give serious thought to choosing a guardian who will fully support your faith beliefs and core ethical values. It’s always best to appoint a person who’s eager to help your children grow up in the faith community you prefer – and who will daily enforce the moral teachings you treasure most;
  • Think about the financial responsibilities involved. Hopefully, you’ll have provided well for your children’s future with life insurance and other funds prior to your death. However, regardless of how much money you’ve put in an account for your kids, you’ll need a guardian who can responsibly handle money. If you do not know of anyone with strong financial skills, you can still choose a person to serve as the caregiving guardian – and designate a different individual to manage the children’s financial resources;
  • What should you do if you do not want your estranged spouse to become the guardian after you pass away? Your Houston estate planning attorney may advise you to write and sign a letter documenting your reasons – and to attach relevant police reports or court documents to the letter. You can then give that letter to your named guardian so that it can be presented to the court after you’ve passed away;
  • How should you proceed if you have children living with you from different marriages? It may be necessary to name more than one guardian for the children. Your main goal should be to keep as many of the kids together as possible. However, you must be realistic about how many children your named guardian can handle;
  • Give some thought to the age of the person you’d like to name. If your parent or another desired guardian is still in good health, you may decide to go ahead and name that person now and simply revisit your decision within the next five years (or when that guardian’s health suddenly declines.) If you are naming a much older person as guardian, be sure to also name a secondary guardian who is willing to step in if the first one cannot serve in this capacity after you pass away. In fact, it’s always a good idea to have a back-up guardian named in your Will;
  • Remember to name every child you want to be cared for by your guardian. It’s never wise to think that a court will assume that all your kids are covered if you only name one or two. Also, extended family members might step in and try to contest your choice if every child isn’t named individually.

Before finalizing any Will that designates one or more guardians, be sure to discuss your choices with your older children. Also, make sure each named guardian is truly interested in helping you by taking on such a demanding assignment.

Please feel free to contact one of our Murray Lobb attorneys so we can prepare a Will that designates a guardian for your children. We’ll be happy to answer any additional questions you may have about this critical task. Most parents gain a greater sense of peace once they’ve legally provided for these important caregiving needs for their children.

Handling Your Adult Child’s Estate in Texas

Losing a child of any age remains one of life’s most difficult challenges. When that child is an adult, you may often need legal advice on how to manage any estate left behind, even if it’s rather limited. Now that so many Americans are living well into their 70s and 80s, the chances of losing an adult child are growing.

One study found that 11.5 percent of people age 50 or older have lost at least one adult child. That likelihood of loss is even higher for African Americans – 16.7 percent of them have lost an adult child. Furthermore, the older you get, the sense of loss can be even harder to cope with since adult children are often the closest caregivers of their aging parents.

Here’s a look at some of the legal questions you’ll need to address after losing an adult child.

Issues Surviving Parents May Need to Face After an Adult Child Passes Away:

  • Did your son or daughter live with and leave behind a spouse or partner? If so, calmly reach out to that person to find out if there’s a Will naming the personal representative of the estate. If your child didn’t have a Will or named someone else as the executor of their Will, you’ll need to interact very sensitively with that person. When you contact your Houston estate planning lawyer, be prepared to indicate your adult child’s marital status at the time of death;
  • Did your adult child have any children? It’s important to stay on good terms with your loved one’s surviving spouse or partner since visitation rights and overall family harmony may depend upon your relationship with that person. (Note: If the surviving spouse or partner has any major substance abuse problems, be sure to share that information with your lawyer. We can explain pertinent child custody and adoption laws, if necessary);
  • Did your son or daughter own considerable land or personal property? Your attorney can help you try to prevent anyone from giving away or disposing of such property before the estate can be probated – or passed on according to your adult child’s estate plan. If you’ve been named the personal representative, obtain a copy of the Will as soon as possible. If no one is living in your adult child’s former house or apartment, be sure someone visits soon to look for pets needing immediate care, valuables that must be secured and vehicles that must be locked and placed in a garage;
  • Contacting your adult child’s employer. If you were named as your adult child’s personal representative, you’ll soon need to contact that employer to find out what employee assets may still be held in a 401k or other account. Likewise, you’ll want to find out if any other benefits are still owing to your child – and if s/he held any type of insurance policy through the employer;
  • What should you do about burial, cremation and related issues? Always try to honor the instructions in your deceased child’s Will or other legal documents. If you can’t find a Will, then work with any surviving spouse/partner and other family members to handle this matter in keeping with your family’s faith practices or general traditions;
  • Do you know what to expect under Texas law if your adult child died intestate – without a Will or some other type of estate plan?  Your Houston estate planning attorney can explain how Texas courts address this type of situation. We can also inform you about how estates are handled by probate courts and how you should manage other tasks that are often required after losing an adult child.

Please know that since our firm has worked with many clients grieving over the loss of loved ones. We’ll provide our legal advice in the most caring manner possible. When you contact one of our Murray Lobb attorneys, we’ll be ready to provide you with simple steps to take so you can concentrate on obtaining comfort from family and friends.

EEOC Guidelines: Training Employees About Workplace Discrimination

To create and maintain a professional work environment, employers must make sure everyone interacts in a respectful manner. The best way to promote respect is to provide proper employee training that carefully defines discriminatory behavior and clearly states what won’t be tolerated.

Newly hired employees should always be trained, even if this must be done individually. They must learn how to recognize forbidden forms of discrimination. Periodic retraining on sexual harassment and other common forms of discrimination should also be mandatory. If you don’t already have a hard copy or online employee handbook that clearly sets forth your workplace standards on discrimination, you can ask your Houston employment law attorney to help you draft one.

Here’s a review of the types of workplace discrimination and harassment that should be clearly forbidden in writing and during oral training sessions. After presenting information on these topics to all your employees, it’s best to also provide a bit more in-depth training to your supervisors and managers who will need to handle the discipline, complaints and investigations usually involved with reported acts of alleged discrimination.

What types of workplace discrimination are most common today?

  • Treating others differently due to their race, skin color, ethnic background or country of natural origin. No job applicant or employee should ever be treated unfairly due to any of these facts or traits. When investigating this type of claim, you may need to privately admonish and inform the wrongdoer that such behavior is legally forbidden and can lead to dismissal. (In egregious cases, immediate firing may be required.) Employers should keep detailed notes about all such complaints and formal reprimands. It’s wise to always have disciplined employees sign and date forms indicating that they’ve been warned that additional acts of discrimination may lead to dismissal. All employee files and complaints must be kept safely locked up and only accessed by a few managers;
  • Discrimination based upon a person’s sex including sexual harassment or current pregnancy status. All workers must learn to respect their coworkers, regardless of another employee’s sex. Stay open to questions and provide answers that are clearly supported by your company’s anti-discrimination policies;
  • Disability status. Regardless of whether someone was born with a physical disability or acquired one later in life, every effort must be made to help that person handle his/her job, unless doing so would place an undue burden on the employer. (Requests may often involve making facilities more accessible or changing an employee’s work schedule so it will interfere less with a medical disability);
  • Age. When workers are young, it’s hard for them to believe that age discrimination is real. However, as they grow older, they’ll start noticing how the most desirable promotions are often given to younger staff members – and not to older workers. And older workers often find themselves in the groups being laid off when a company claims it’s going through hard times. This type of discrimination is often self-defeating since older workers often: (1) have excellent problem-solving skills due to all their experience, (2) usually enjoy learning new skills and helping to train newcomers – and (3) often have the lowest rates of absenteeism due to their dedication to their employers;
  • Religion. Sadly, although most American adults know that one main reason this country was founded was to extend religious freedom to all citizens, too many people today treat coworkers with disrespect when they appear to follow faith practices different than their own;
  • Discrimination related to an employee’s genetic information (or family medical history). Both state and federal laws forbid this type of discrimination. One of the federal laws is named the Genetic Information Non-Discrimination Act (GINA). Title II of GINA specifically prohibits workplace discrimination based upon an employee’s genetic information. Employers must exercise great care when hiring the employees who must handle all company medical insurance and claim forms. These workers must understand that any knowledge they accidentally gain about an employee’s medical condition(s) or family history must be held in the strictest confidence.

Special training for company managers and supervisors

An additional, separate training should be periodically presented to these employees to be sure they fully understand how to handle every discrimination complaint they receive. After all, they will be playing a key role in investigating these complaints and making sure they handle their responsibilities in strict compliance with all state and federal laws.

Be sure that these higher-level employees have made the complaint process both easy and transparent for workers. It’s their job to remind employees that they will not be punished for coming forward with claims – or acting as witnesses for those who are filing claims.

In your special training program for these workers, be sure to also address the following topics.

  • Managers must understand that detailed, investigative notes must be kept. When an employee files a complaint based on alleged acts of discrimination or harassment, you need to obtain information about each time such acts were committed and get the names of all possible witnesses. Dates and times are crucial bits of information. If more than one person was involved in the illegal behavior, be sure to write down all names – and speak with each of these individuals separately;
  • All managers and supervisors need clear definitions of what can constitute a “reasonable accommodation” for a disabled employee. It’s a good idea to review the content of your training with your attorney prior to making this type of presentation;
  • Retaliation. Inform higher-level employees that all forms of retaliation for reporting alleged acts of discrimination or harassment are strictly forbidden – and can result in liability for those involved;
  • Acceptable religious attire, hairstyles and practices. Explain to your managers what type of religious clothing is fully acceptable in the workplace. You should also tell them which hair or beard styles should be allowed, based upon an employee’s stated religious beliefs. When possible, managers should try to accommodate time off from work to attend special worship services – if doing so won’t cause an undue burden on co-workers or the company;
  • Sexual harassment. Supervisors and managers must be fully acquainted with all the types of language and behavior that can constitute sexual harassment. Remind them that offensive cartoons or signs related to sex should never be posted or circulated at work;
  • Privacy is crucial to all investigations. Remind all of those involved with investigating any claims of discrimination or harassment that they must never share any information they gain with non-investigative employees – or anyone outside of the company – since confidentiality is critical for everyone.

Please feel free to contact one of our Murray Lobb attorneys if you have any questions about how you’ve drafted portions of your employee handbook, especially sections addressing discrimination and sexual harassment. We can provide you with useful advice and are always available to help should an employee file a claim with you or the EEOC alleging any form of workplace discrimination.

Key Ways to Protect Your Business Against Cybersecurity Threats

After the massive data breach involving Marriott’s Starwood hotel brands was reported in 2018, businesses of all sizes began wondering again if anyone can remain safe against hackers. About 500 million guests who stayed at Starwood properties (including Westin, Sheraton, W Hotels, and the St. Regis) had their names, phone numbers, email addresses, birth dates, encrypted credit card data and other information stolen.

What’s shocked people even more is that this breach covered a four-year time period extending from 2014 through September 2018. It’s hard to believe that any company’s computer networks could be so severely compromised over such a long period of time before being discovered.

Companies of all sizes who haven’t already done so must immediately take proactive steps to reduce their chances of having their customer data and other proprietary information suddenly stolen or compromised.

What one past study revealed about cybersecurity threats – that keep increasing annually

  • Close to half of the businesses surveyed consider themselves “very dependent” on the Internet for their daily business operations;
  • Over one-third of those interviewed said that it would be very damaging for their companies to be without Internet access for 48 hours in a row;
  • Small business employees rely on using the Internet for 75% to 100% of their daily work.

A much more recent study revealed that 58% of the victims of malware (cybersecurity) attacks are small businesses. Furthermore, cyber attacks wound up costing most targeted small companies about $2,235,000. Clearly, no one should avoid addressing this crucial issue.

Fortunately, various cybersecurity experts and business professionals are sharing their ideas about some of the best ways to prevent new attacks – as opposed to just responding to them.

You must determine your current level of risk to an attack before creating a protection plan

Even if you already have a highly qualified IT professional on your payroll, it’s often best to hire an outside cybersecurity consultant to come in and objectively assess your various levels of risk to a hacking attack. A “white-hat hacker” (someone on your side) can attempt to evaluate your code vulnerabilities and network and system weaknesses.

This expert can also evaluate how appropriately your employees are responding to suspicious emails that could easily introduce malware into your computer networks and databases. Give serious thought to having this type of outside expert audit your risk level at least once every two years – if not annually.

Keep in mind that it’s often useful to assign a risk level of low, medium or high to each system that might be compromised by a data breach. This can help you as you design a cybersecurity protection plan that prioritizes various risks.

Regularly review the FINRA cybersecurity checklist if you’re a smaller firm or business

This source is designed to help companies handle the following tasks.

  • Identify and evaluate all current cybersecurity threats to better protect all business assets against outside intrusions (or in-house security lapses);
  • Readily determine when your company software or databases have been hacked or compromised;
  • Decide (in advance) how to quickly counter attacks or threats as soon as they’re detected. It’s always wise to create several options based on the type of information or software that may be under attack;
  • Develop a plan with any in-house IT professionals and your outside cybersecurity consultant for readily recovering any company assets that are lost, stolen or otherwise compromised.

Create an employee training program that will help protect your systems and networks

Your employees must take the ongoing threat of a cyberattack very seriously. Staff members who fail to follow all in-house cybersecurity protocol often make it easier for outside hackers to gain entry. You might consider requiring a two-factor authentication password for those seeking to gain access to some of your company’s most valuable or vulnerable accounts.

Before providing this training, you must decide which parts of your computer network, systems and databases should remain off limits to various levels of employees.

It’s also important to let your employees know if you’ll be regularly monitoring their usage of all company computers. (It’s best to obtain written permission for this practice at the time you initially hire all employees). Inform everyone that each employee’s access to information will probably be restricted — based on their normal daily need to access certain information or to complete their assigned tasks.

Give very serious thought to limiting the outside Internet websites that employees can visit while at work and indicate what types of data downloads from outside sources are forbidden. Including these restrictions in your company’s formal training and cybersecurity protocol can help decrease the chances of anyone downloading threatening malware or viruses.

Always ask everyone to encrypt their attempts to access various company databases and accounts. You should also encrypt access to all email accounts. Finally, be sure all employees know the safest ways to file and store data, so it can be fully protected from hackers, while remaining easy to access again when needed.

Develop a comprehensive plan for offboarding employees (those leaving your company)

Regardless of whether someone is being fired or has accepted a new job elsewhere, you need to have a systematic way of reclaiming company property when workers leave. You must also revoke their access to all business networks. Be sure all exiting employees return all company laptops, ID badges, company credit cards, mobile devices and other equipment.

Finally, delete the email addresses of exiting employees as soon as they leave. Someone should also change the company passwords they regularly used that were not encrypted. And always try to make sure every employee has signed an appropriate NDAs (non-disclosure agreements).

Although not intended to be comprehensive, we hope this list of suggestions will help your company gain greater protection against future cybersecurity attacks.

Please feel free to contact one of our Murray Lobb attorneys about how various Texas and federal cybersecurity laws and regulations may impact your company. We can also provide you with a non-disclosure agreement for exiting employees to sign and review the terms and legal limitations of any cybersecurity insurance policy that you may be looking at in hopes of limiting your business liability for future data breaches.

Why You Need to Create a Business Succession Plan NOW

Why You Need to Create a Business Succession Plan Now

Even when all owners of a company plan to work until the very end of their lives, there’s still a need for a viable business succession plan. After all, anyone can become totally or partially disabled as a result of a serious car accident or die of a deadly disease on almost any day.

When business owners hide from this reality, they often create havoc for all surviving partners or family members. Instead, it’s better to move forward at a calmer time to carefully address these types of possible future events.

Your Houston business law and estate planning attorney can help you decide on the best way to either pass your business on to others — or liquidate all the assets to meet your own needs and those of your survivors.

General questions you must answer yourself about any succession plan

  • What is the current market value of this business and all its assets?
  • Who is the best possible buyer? Do I prefer to sell the business to a co-owner, family member, employee or a third party?
  • Am I more likely to sell the business sooner rather than later? Am I interested in selling the company now due to health, retirement or other reasons?
  • Is this business tied to its current location? If not, would it be reasonably simple for the business to be moved elsewhere and successfully run by someone there?
  • What preferences do I have about how the sale should be financed? Am I willing to personally finance the loan? If so, what type of collateral should I require?
  • Which business advisors should I consult with while securing all the required contracts and other paperwork? Besides business and tax lawyers, do the specific assets of my company require me to consult with real estate agents, insurance and business brokers, bankers and financial advisors?

It’s often wise to start this process by locating and reviewing all your current business contracts and deeds. Next, give some thought to your company’s most productive and respected employees. Then, carefully determine the current market value of every business asset. Finally, schedule confidential, preliminary talks with any co-owners, family members who work for you, other key employees and perhaps one or two other potential buyers of your company.

Once these initial tasks have been handled – or while you’re completing them – it’s wise to meet with your Houston business law attorney.

Advantages and disadvantages of selling to different parties

Unless you’re the sole owner of the company and simply want to liquidate all the business assets and not sell (or transfer) the company to others, you must carefully evaluate each potential buyer and decide which one is best qualified to run the company in your absence.

  1. One or more family members. In most instances, it’s usually best to sell to only one family member, preferably one who is already involved in the business and respected by your employees. Ask your attorney about the best ways to prevent future challenges to any decision you make. One approach might involve drafting a buy-sell agreement that clearly states who is going to be running the company — and asks all others who currently work there (or own shares) — to sell their shares to the person you’ve named as your successor. This approach often helps minimize future family disagreements.

When selling a business to a family member, you may want to execute a self-canceling installment note (SCIN). Your attorney can explain why that may be useful;

  1. A key employee who is highly knowledgeable and well liked by other workers. The most common drawback to selling to a key employee is that the person may not be able to give you a large down payment in cash. Be prepared to execute a buy-sell agreement that clearly lists all the valuable collateral for any loan you may be willing to finance. You can also suggest that this employee try to obtain an SBA (Small Business Administration) or bank acquisition loan that will provide you with up to 70% or more of the purchase price upfront;
  2. You can sell your shares to your co-owners. Be sure to clearly indicate the sale’s price and all purchase terms;
  3. An outside third-party or competitor. Be very careful when selling to this type of buyer if you’re financially depending on the person to keep running the company. Due diligence is critical when evaluating every potential buyer.

Since this article only provides a broad overview of the types of issues involved when drafting a business succession plan, you’ll need to obtain competent legal help to handle this entire process. Should you already have some type of succession plan, we can help you decide if it’s time to update it.

All our Murray Lobb attorneys have the necessary experience to help you create a business succession plan that’s specifically tailored to your company’s unique needs. We look forward to helping you draft all the contracts and other documents you’ll need while selling your business.

 

Steps Required to Dissolve a General Partnership in Texas

Even when business partners get along well with each other and succeed, a time may come when they may develop new interests, decide to retire or move elsewhere for business or pleasure reasons. While the Internet and modern communications make it possible to still run businesses with partners scattered around the globe, it’s still quite common for partnerships to break apart or take on new members when others leave.

Do You Need a Written Partnership Agreement in Texas?

Normally, Texas law doesn’t require general (or “at-will”) partnerships to create a written partnership agreement. However, it’s always best to draft one so that when the entity breaks apart (or any partner leaves), you’ll know exactly how to pay off all partnership debts and distribute the remaining assets among everyone.

When general partnerships don’t have an agreement, then Texas law expects the partners to govern their “wind-up” activities in keeping with our state’s default partnership laws.

Here’s a broad overview of the tasks that you and your partners must handle as you dissolve your partnership. Should you have any questions at this early stage, it’s always wise to schedule an appointment with your Houston business law attorney.

First Steps to Take When Preparing to Dissolve Your Partnership

Schedule a meeting so everyone can discuss how your written partnership agreement requires you to dissolve the partnership. During this meeting, you must take a vote to determine if all parties still holding majority rights (or financial interests equal to or greater than 50% of the partnership assets) favor dissolving it. Next, ask this same majority to vote whether they’re ready to draft and sign a written resolution stating that the partnership will now wind up all its affairs and be dissolved.

At this point, all partners who want to keep working together under a new partnership agreement can indicate this desire to everyone else – and offer to buy-out the partnership shares of those who are leaving.

Handling Debt Payments and Winding Up All Remaining Matters

Every current partner should expressly agree to complete certain tasks approved by all those winding down the partnership’s affairs – and to refrain from negotiating any new business that could potentially obligate all partners after the dissolution.

As referenced above, those leaving the partnership are free to sell their shares in it to others, in keeping with their original partnership agreement (or the state’s laws governing such transactions when there is no written agreement). To help the partnership pay off existing debts, all partners can vote on which current partnership assets (if any) may be sold for cash.

The laws governing the pay-off of all partnership debts are set forth in our state’s Uniform Partnership Act. It basically states that you must pay off all your creditors first – before paying back each partner for all past capital contributions to the partnership.

Are There Any Remaining Wind-Up Steps You Must Address?

  • Paperwork filing with the state. In Texas, there’s no need to file anything when dissolving an at-will (general) partnership;
  • Providing notice to all creditors, customers and other parties. It’s customary to send out notices through the mail to all your business contacts so they’ll know that your partnership is being dissolved as of a certain date. However, there’s no law which requires this to be done. You can also just simply publish a notice about the dissolution in your local newspaper;
  • Updating all out-of-state registrations. To prevent your partnership from owing any more fees to other states where you’ve registered for the right to do business, you need to formally notify the correct offices via certified mail that you’re dissolving your partnership;
  • Paying all taxes that are owed. Although Texas doesn’t require you to obtain a tax clearance before winding-up your partnership, you must make sure all taxes owed have been paid before dissolving it. This step includes filing a final federal tax return for your partnership in keeping with Texas law.

Should you have any specific questions about dissolving your partnership – or making sure that you’re handling all tax matters properly – please contact our law firm so we can provide you with all pertinent legal advice.

General Steps to Take While Preparing to Sell Your Business

Selling your company at the proper time can provide you with greater freedom and added income as you pursue other business or personal goals. Whether you’re a sole proprietor who can move forward alone — or someone who must confer with business partners or a corporate board of directors, there are basic steps you can follow that can help streamline the process.

As you further contemplate this move, give serious thought to timing and be ready to explain why you’re making specific choices to prospective buyers; They’re sure to ask why you’re selling your company now. Also think about whether you should hire a professional business broker, especially if you don’t want to manage the sale on your own and are concerned about locating the best potential buyers.

Each of these key topics are discussed further below.

Are you prepared to tell qualified buyers why you want to sell your business now?

If sales are dropping or you’re currently losing a sizable portion of your customer base, you may want to postpone the sale for six months or a year. During that time, you may be able to rebuild the company and make it more viable.

Of course, business owners often want to sell their companies for many other reasons, including the following ones.

  • They’re eager to retire and simplify their lives – letting go of business activities.
  • They have current disputes with partners, co-owners or corporate board members, so they would just like to move on. Obviously, you’ll need to reference these issues in a very tactful yet honest manner if you have no other reasons for selling.
  • The sole owner (or another party) is facing a serious illness or impending death.
  • You want to keep working — but in a less stressful capacity. Be ready to share this in as upbeat a manner as possible – while being open and honest about the pressures of running the business.
  • You’ve developed a keen interest in a different business field and are eager to get your new venture up and running.

These are just a few of the reasons why people often choose to sell a business. Whatever you decide to tell prospective buyers – be as honest as possible since a failure to disclose current problems is unethical and could damage your reputation in the community.

If your business is losing value, be prepared to tell potential buyers (after carefully qualifying them) how they might reverse that trend. You can also explain why they may still want to simply purchase all your valuable vehicles and equipment.

Decide whether you should sell the business yourself – or hire other professionals

  • Legal advice can prove crucial. You’ll also need help drafting the various legal contracts and documents required to support a sale.
  • You’ll want to work closely with your accountant. All your business and tax records must be fully updated.
  • A business appraiser can prove very helpful. This individual can help you determine a fair asking price for your company.
  • Even a brief consultation with a business broker can benefit you. This person knows how to locate a healthy pool of potential buyers. This process can prove extra challenging if you do not want to run any public advertisements.

Be prepared to locate or create various documents while trying to complete a viable sale

You must be prepared to share all your basic financial statements and records for the past three or four years. It’s also crucial to create a comprehensive list of all your company equipment and fixed assets tied to your business accounts. (Be prepared to spend the necessary fees to repair all valuable vehicles, equipment and other goods involved with the final sale).

It’s also important to create a detailed list of your ongoing sales transactions and the names of the companies that currently provide all your company’s most critical supplies. Copies of all current contracts and leases should also be made available so qualified buyers can review them.

Be prepared to carefully decide which buyers may be the most dependable ones

Many business owners prefer to sell their companies to close family members, trustworthy employees, friends or current customers. You’ll need to choose wisely, especially since this type of sale often takes from six months to two years. 

Of course, never disclose private information about your business to potential buyers until after they’ve each agreed to sign non-disclosure agreements and qualified for financing plans that meet your requirements.  Be prepared to negotiate carefully – or ask your attorney to handle the negotiations on your behalf.

If you’re ready to sell a business – or just want to learn more about all the various legal and practical steps referenced above, please contact one of our Murray Lobb attorneys. We look forward to answering all your questions.

The Basic Steps for Forming a Texas Corporation

Although running a business can be very challenging, it’s often invigorating to reach a point when you may need to incorporate your company. This process is often begun by discussing what can be gained or loss by making this move with your business partners. You should also consider speaking with your Houston business lawyer so you’ll fully understand all the legal implications of making this decision.

The following material reviews the main reasons that many companies choose to incorporate their businesses. It then notes the most common steps that must be taken prior to filing a certificate of incorporation with the Texas Secretary of State’s Office.

Potential advantages that are often acquired by incorporating a business

  • Improved legal liability status. Creating a corporation can provide each individual business partner with added protection against personal liability for the actions of all other executives or employees. It can also offer greater protection for business assets;
  • Critical, everyday activities can be simplified. Upon incorporating, it can become easier to add new owners and investors while still maintaining the same level of control over your company;
  • The company can more easily transact business all around the world. It’s often easier to conduct business in a corporate form in many other countries;
  • It can help you one day take your company public. While your corporate executives and employees may always want to conduct business privately, a time may come when it may be to your financial advantage to take the company public and sell stock.

Those are just a few of the main reasons why many business executives decide to incorporate their current companies or partnerships.

Common steps you must take when you’re ready to incorporate your business

  1. Name the corporation. Try to choose a name that suits your business and helps raise your profile. You and your lawyer will need to conduct a formal search to see if any of the names you’d like to choose are currently available in Texas;
  2. Select a registered agent and office. Be prepared to designate a trustworthy party to serve as your registered agent and name the city where that person will keep his or her office;
  3. Choose which parties will be named as the corporation’s organizers or incorporators. The names and addresses of each of these individuals must be listed within the certificate of formation;
  4. Designate your corporate directors. After the certificate of formation has been filed, the directors take over running your business. These highly knowledgeable executives must also have strong management and interpersonal skills that will help them successfully negotiate all future decisions and transactions;
  5. Draft a brief statement, indicating the corporation’s official business purpose. While this may sound rather straightforward, it’s often wise to run this description by your lawyer to be sure you’ve fully covered all key aspects of your intended business transactions;
  6. Consider obtaining professional help with the completion of your official certificate of incorporation. Like other states, Texas has specific expectations for the precise information that must be included. Since these requirements can change periodically, it’s often wise to ask your lawyer to review the contents of your certificate of incorporation;
  7. Pay the required fees. These should normally be posted on the Texas Secretary of State’s online website. If you prefer, your lawyer can submit your fees and certificate of incorporation for you.

While this list of common steps isn’t intended to be fully comprehensive, it should clearly indicate the basic steps that you and your business partners should take if you decide that it’s time to incorporate your business.

Please feel free to contact the lawyers at Murray Lobb so we can answer any specific questions you may have about this process. We’ve helped many clients incorporate their businesses over the years – and we’re ready to put that experience to work for you.

Tenants: Beware and Negotiate

In a matter of first impression before the Texas Supreme Court, the Court ruled that a Residential Lease provision that obligated the Tenant to pay for any damages that result from “any cause not due to Landlord’s negligence or fault” was not void and unenforceable.

The background facts:  A young lady, Carmen White, got her first apartment and signed a standard Texas Apartment Association (“TAA”) lease.  Her parents gave her a washer and dryer set as a gift.  While using the dryer, it caught fire and burned her apartment and others nearby.  The damages to the apartment complex exceeded $83,000.00.  The source of the ignition was unknown and no fault was placed on White or the Landlord.  The landlord’s insurance company paid the claim, subrogated, and demanded reimbursement from Ms. White.  When she refused to pay the insurance company brought suit against her. 

The Procedural facts:  The case was tried to a jury.  After trial, the jury answered “no” to a question asking if White’s negligence proximately caused the fire.  However, the jury answered “yes” to the question whether White breached the lease agreement by failing to pay the casualty loss.  The jury awarded the landlord $93,498.00 in damages.  White moved for judgment not withstanding the verdict which was granted and the trial court rendered a take-nothing judgment.  The Court of Appeals affirmed the trial court ruling holding that that the Reimbursement Provision was void as against public policy.  The Appeals Court found a fatal conflict between the Reimbursement Provision’s broad language and Chapter 92 of the Texas Property Code restricting a Landlord’s ability to contractually allocate repair responsibilities.

The Supreme Court ruling:  The Supreme Court was to determine, as a matter of first impression, whether public policy embodied in the Texas Property Code precludes enforcement of a residential lease provision imposing liability on a tenant for property losses resulting from “any other cause not due to the landlord’s negligence or fault”.  In so holding the Supreme Court (in a 5-4 decision) repeatedly stated the well known legal axiom that “Parties in Texas may contract as they wish, so long as the agreement does not violate the law or offend public policy, recognizing the the Legislature has limited the freedom of a landlord and tenant to contractually allocate responsibility for repairs materially affecting health and safety.  Interestingly in footnote 4, the court acknowledged that above the signature block, the lease prominently states that the lease can be modified by agreement of the parties, but neither party requested modifications to the Reimbursement Provision. 

The Lease contained a reimbursement provision standard in the TAA lease which obligated the Tenant to pay for any damages that result from “any cause not due to Landlord’s negligence or fault”.

As we all know it is almost impossible to get a Landlord to revise any provision in a standard form lease, but if you are to avoid the tragedy that happened to Ms. White, you must negotiate a modification of the Lease.

Be aware that the TAA Lease is a legal document and forms a binding contract.  You should consult an attorney for help revising the Lease. 

We would first add a sentence to Section 10, Special Provisions.  We would write in the blanks a sentence to limit my liability.  For instance, “Notwithstanding anything to the contrary, Tenant shall never be responsible for repair, or liable for damages to Landlord’s property, including other units in the complex, unless such damage is proximately caused by the negligence of Tenant, Tenant’s guests, or invitees.”

Secondly, we would strike out certain language contained in Section 12. We would strike out “or any other cause not due to our negligence or fault”, at the end of the first sentence of Section 12.

We firmly believe that no residential Tenant should be held responsible to repair other units damaged or for property losses “resulting from any other cause not due to the landlord’s negligence or fault.”  Do not let this happen to you.