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November 1, 201517052300

2015 Texas Legislative Update on Entity Law

This article summarizes several pieces of legislation passed by the Texas Legislature in its 2015 Regular Session that amend primarily the Texas Business Organizations Code (the “Code”).

November 1, 2013Legal Opinions Committee of the Business Law Section

Supplement No. 6 to the Report of the Legal Opinions Committee Regarding Legal Opinions In Business Transactions

Statement on Changes to the Procedure for Good Standing Certificates Issued by the Texas Comptroller of Public Accounts

March 15, 201814071200

The Walking Dead: Forfeitures and Involuntary Terminations of Filing Entities

Do either of these sound familiar? 1) Your client tells you she wants to terminate her entity and she has heard that if she just ignores the notices from the Comptroller’s officer to file the franchise tax report the state will terminate her company for her. Your client called the Secretary of State’s office, and they told her she needs to file documents with the Comptroller and Secretary of State. The client asks why she should go to all that trouble when the state will terminate the entity for her if she does nothing? or 2) The client’s existence was forfeited for failure to pay franchise taxes in 2011, but the company has continued to operate and has a substantial amount of real and personal property, including intangible property such as receivables. This situation comes to your attention when you filed suit for the company to collect on a promissory note executed in favor of the company in 2010 that became due in 2016. The maker of the note is arguing that the company cannot sue on the note and that the claim is barred because it was not brought within three years after the company’s existence was forfeited. Now that the company’s “forfeited existence” has come to your attention, you and the client have many questions. Can the company collect on the note? Where does the company stand with respect to its assets, rights, and liabilities?Does anyone in the company have any personal liability for liabilities incurred in the business? Can the company reinstate even though it is beyond the three-year post-termination survival period? What effect will a reinstatement have?

May 19, 2017Elizabeth S. Miller

The Walking Dead: Forfeitures and Involuntary Terminations of Filing Entities

Do either of these sound familiar? Your client tells you she wants to terminate her entity and she has heard that if she just ignores the notices from the Comptroller’s officer to file the franchise tax report the state will terminate her company for her. Your client called the Secretary of State’s office, and they told her she needs to file documents with the Comptroller and Secretary of State. The client asks why she should go to all that trouble when the state will terminate the entity for her if she does nothing? The client’s existence was forfeited for failure to pay franchise taxes in 2010, but the company has continued to operate and has a substantial amount of real and personal property, including intangible property such as receivables. This situation comes to your attention when you filed suit for the company to collect on a promissory note executed in favor of the company in 2009 that became due in 2015. The maker of the note is arguing that the company cannot sue on the note and that the claim is barred because it was not brought within three years after the company’s existence was forfeited. Now that the company’s “forfeited existence” has come to your attention, you and the client have many questions. Can the company collect on the note? Where does the company stand with respect to its assets, rights, and liabilities? Does anyone in the company have any personal liability for liabilities incurred in the business? Can the company reinstate even though it is beyond the three-year post- termination survival period? What effect will a reinstatement have?

March 13, 2015Elizabeth S. Miller

The Walking Dead: Inadvertent Terminations of Business Entities

Do any of these sound familiar? The client wants to terminate his entity. Upon checking the Secretary of State’s records, you find that the entity is in a "forfeited existence" status. Voluntarily terminating the entity requires an application for reinstatement and payment of additional fees before filing the certificate of termination for a voluntary termination. Is all that really necessary? Are there risks to my client that would outweigh the cost and effort of reinstating in order to voluntarily terminate? The client’s existence was forfeited for failure to pay franchise taxes in 2008, but the company has continued to operate and has a substantial amount of real and personal property, including intangible property such as receivables. This situation comes to your attention when you filed suit for the company to collect on a promissory note executed in favor of the company in 2007 that became due in 2013. The maker of the note is arguing that the company cannot sue on the note and that the claim is barred because it was not brought within three years after the company’s existence was forfeited. Now that the company’s “forfeited existence” has come to your attention, you and the client have many questions. Can the company collect on the note? Where does the company stand with respect to its assets, rights, and liabilities? Does anyone in the company have any personal liability for liabilities incurred in the business? Can the company reinstate even though it is beyond the three-year post- termination survival period? What effect will a reinstatement have? The Secretary of State’s records show that your client, a limited partnership, was involuntary terminated on April 16, 2012, for failure to file a periodic report. It was reinstated on May 9, 2014. Was its reinstatement retroactive? In other words, did the entity legally exist between April 16, 2012, and May 9, 2014? How does this affect events that occurred during the time the entity was involuntarily terminated?

May 23, 2013William H. Hornberger, Steven D. Moore

Tax Considerations in Entity Choice

This outline discusses certain relevant federal income and Texas state tax considerations relating to the selection of an entity for engaging in business or investment. The outline begins with a discussion of the classification of entities for federal tax purposes and, in particular, the check-the-box regulations. It then provides a summary of some of the principal tax considerations relating to sole proprietorships, C corporations, partnerships, limited liability companies and S corporations. This outline does not address the taxation of trusts and estates, regulated investment companies, real estate investment trusts, real estate mortgage investment conduits, cooperatives, exempt organizations or insurance companies.