Texas Limited Liability Company Disputes

Creating a good business starts with laying the foundation. The legal structure for your business can help you avoid future disputes. That’s why it’s vital to structure your company to avoid liability, taxation, or other legal details that aren’t always obvious. 

If you’re having poor communication with your business partner and considering going your separate ways, work with an experienced business partnership attorney Wade McClure at Mayer, LLP.

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A Limited Liability Company

A Texas Limited Liability Company or “LLC” is one of the popular business options. LLCs are popular because they make filings much easier. While other business entities are drowning in bureaucracy, an LLC can streamline this process. 

Generally, LLCs are based on state laws and have the same characteristics as corporate and partnerships. Members of an LLC are not liable for their business debt if certain governance formalities are forms of payment are not followed. LLCs are taxed as transferring entities, and all business profits are taxed on your tax returns.

Texas Attorney Wade McClure, understands the importance of protecting your LLC. Having the proper foundation for resolving disputes between your Limited Liability Company members is often pivotal in partnership disputes yet overlooked. 

Texas LLC Partnership Disputes

Partnership disputes typically involve claims and counterclaims between the owners based on oral or written business agreements. Your civil action claim disputes with partners can include breach of fiduciary duty, shareholder oppression, usurpation of opportunities, and fraud. 

Working with a seasoned LLC lawyer in Texas with experience successfully representing individuals and companies in a wide array of business law cases can help protect you. Contact Wade McClure for a consultation or read on how to resolve your limited liability disputes. 

Generally, Texas business relationships are divided into four types. General and limited partnerships can protect you from personal liability. Business disputes still may arise, especially when financial interests are at stake. Your partnership agreement can help you avoid many of these mistakes. 

A general partnership is the most basic form. These partnerships do not require forming a business entity with the state. In most cases, partners form their business by signing a partnership agreement.

Limited partnerships (LPs) have at least one general partner who is fully responsible for the business and one or more limited partners who provide money but do not actively manage the business.

A limited liability partnership (LLP) operates with all partners actively managing the business, but it limits their liability for one another’s actions. Business partners still bear full responsibility for the debts and legal liabilities of the business, but they’re not responsible for the errors and omissions of their fellow partners.

A limited liability limited partnership (LLLP) is a newer type of partnership. An LLLP operates similarly to an LP, because one general partner manages the business, but the LLLP limits the general partner’s liability so all partners have liability protection.

Limited Liability Disputes

Disagreements can put your LLC in jeopardy. If a Limited Liability Company deviates from its mutual agreements or contractual obligations, the ownership and management will be in danger. This can threaten the entire business.

Common LLC Business Partnership Disputes

The most common LLC disputes involve finances, duties, and conduct. LLC disagreements arise around compensation or how often and how much profit should be distributed. Other LLC disputes involve performance and the amount of work being put in.

Texas Business Organizations Code states that a member is not liable for a limited liability company’s debt, obligation, or liability. However, some of the most threatening disputes to most LLCs involve unethical decisions that harm the business. Unscrupulous partnership practices can include:

  • Entering into another competitive business relationship
  • Failures in the documentation of LLC funds 
  • Misuse of the LLCs resources
  • Stealing or embezzling from the LLC 
  • Stealing trade secrets or confidential information

Role Disputes

Clearly defined roles can help alleviate the problems with joint ventures. A company agreement specifically states each partner’s role, and the expectations of those roles can be very useful. 

Having clear answers for how your corporation manages its daily activities, business strategies,  hiring practices, responsibilities, and obligations can make solving issues much easier in the future. 

Poor Systems

Having systems in place with premeditated solutions for solving problems can help your business save time and resources. Speak with a business law specialist about properly building the right agreements so that you’re not held personally liable. This can keep your assets from being at risk.

Breach of Contract 

One of the most common LLC disputes is a breach of contract. Business contracts create agreements between partners. Business law professionals have found that the best way to protect yourself and your partners from litigation is by using independent legal reviews on all contractual matters.

Breach of Fiduciary Duty

Partners typically rely on one another to help their business scale. If the managing member of an LLC exercises sufficient control, they may owe fiduciary duties to the other members of the LLC. Breaching these duties could be grounds for an LLC dispute. 

Minority Owner Rights

If majority owners make decisions that violate minority rights, the minority partners can seek a legal claim, but may face limitations on recoveries in Texas. If your rights as a minority owner have been violated, speak with a Texas business law attorney today. Wade McClure at Mayer, LLP can help you protect your minority ownership rights. 

Embezzlement

Theft of business restricted funds by one or more partners, or members of an LLC  is illegal. Embezzlement is a serious crime, according to the Texas legislature. Embezzlement may result in civil theft liability or criminal actions and jail time. Choose a law firm with experience trying business law cases before the Texas Supreme Court. 

Texas Limited Liability Disputes

Texas business law specialists recommend outlining a procedure for handling significant differences, discipline, and breaches of the partnership agreements. Meditation can be a viable option instead of litigation. Your Texas limited liability disputes attorney can help you decide which options are best for establishing checks and balances in your business. 

Discussing topics that can turn into future disputes can help you shape your Company Agreement. This also sets expectations for all the members and managers of your Limited Liability Company.

Written LLC Company Partnership Agreement

An LLC Company Agreement is Partnership contracts are not required by law but help prevent problems. Contacting a knowledgeable attorney can help you start your business on the right foot. Disputes arise, but the written agreement can help you protect your income and limit your exposure to civil penalties. 

Each LLC Member partner can benefit from having clear regulations. This can help the LLC Members partners avoid court, make plans for the repayments of debts and financial statements, or who has to pay when the company is liable. Each partner in a general partnership wants to protect themselves from individual liability. 

Finances, Income, and Debts

LLC Members Partners can agree to split profits and losses evenly, or depending on the LLC Agreement. partnership, the partner might have a higher share of profits. The distribution of resources must remain transparent before jumping into any business collaboration.  

The LLC partnership has to keep financial records separate from personal financial accounts. They also should have separate bank accounts and financial reports. The LLC and its Members Partners that effectively handle their finances can avoid disputes. 

Death or Withdrawal

Eventually, a Member of the LLC partner may want or be forced to leave the business; it’s important to prepare. Writing about what happens in these instances can help keep partners on the same page when these issues arise. All Members partners may benefit from having clear language about what to do when a partner leaves. 

Roles and Responsibilities

Having a clear idea of everyone’s roles and responsibilities outlined in writing can help with accountability. When businesses are clear about what they expect, it’s easier for them to reach their goals. 

Minority Members should owners have to be protected as well. Even if they are a limited partner, they can still take your business to the trial court when the majority owner refuses to follow the arrangements of the LLC Company Agreement. partner agreement. 

New LLC MembersPartners

Your business might need new partners at some point. So it’s important to discuss procedures for breaking new LLC Members partners onboard. Business entities such as LLCs Corporations that prepare for the worse often avoid having to pay in the long run. A business contract can help your company to survive and thrive. 

Non-Compete Agreement

If one of your business associates leaves the LLCcompany, you don’t want them to take that knowledge and use it for a competitor. It can be useful to write in certain clauses that protect from this in your business contract. Consult with an attorney at Wade McClure at Mayer, LLP about creating a legally binding non-compete agreement today. 

Single-member LLC

Texas law provides for LLCs with one or more members. These can be a good solution for individuals who already operate in a sole proprietorship, but want liability protections provided by an LLC. For tax purposes, the Internal Revenue Service (IRS) usually treats single-member LLCs as disregarded entities, meaning that all profits and losses pass through to the LLC’s owner.

Even though partnering with others can be fun, it’s imperative to remain practical. Preparing for how to deal with employees and partners can help keep you and your business from being liable for a bad business partner, whether you form an LLC, a partnership or a corporation.

Texas Certificate of Formation

Generally speaking, a Texas LLC must file an incorporation declaration with state offices in Texas. Texas accepts filing a certificate of formation form online via SOSDirect, the state’s official portal for e-filing formation documents and other entity-related matters. 

Filing with the Texas Secretary of State’s office is crucial to protecting your business in Dallas, Houston, San Antonio, and Texas communities. Many businesses fail because they protect themselves by abiding by state law. 

You can also file a change of registered agent and change of principal place of business with them. This process can be difficult if you’re inexperienced, so feel free to contact Wade McClure at Mayer, LLP for assistance in filing your business. 

Limited Liability Company Formed in Texas

When you create a LLC for a business in Dallas or Houston,  LLC, you are usually not liable personally unless you commingle money with other business, don’t observe the LLC formalitiesor the r company voluntarily reorganizes. A few other advantages can also be incorporated into a Texas San Antonio LLC, giving your business entity credibility in the eyes of potential customers or customers. This also helps with opening business bank accounts to separate personal property from business assets.

Although a corporate agent may not be able to escape liability when they personally participate in wrongful conduct, they may be able to fight their liability when their LLC Company Agreement is operating agreement is sound and the agent observes and respects the formalities and requirements for the LLC.. 

Wade McClure & Mayer, LLP will work diligently to find business solutions for you and your company. Schedule an initial consultation and let’s get started now.