TEXAS BUSINESS ORGANIZATIONS MANUAL

2024 Edition

Copyright Information

The State Bar of Texas, through its Texas Bar Books Department, publishes practice books prepared and edited by knowledgeable authors to give practicing lawyers and judges as much assistance as possible. The competence of the authors ensures outstanding professional products, but, of course, neither the State Bar of Texas, the editors, nor the authors make either express or implied warranties in regard to the use or freedom from error of this publication. In the use or modification of these materials, each lawyer must depend on his or her own expertise and knowledge of the law.

IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the IRS, we inform you that (1) this written material was not intended or written by the author(s) to be used for the purpose of avoiding federal penalties that may be imposed on a taxpayer; (2) this written material cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer; (3) this written material cannot be used in promoting, marketing, or recommending to another party any tax-related transaction or matter; and (4) a taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.

The use of the masculine gender in parts of this manual is purely for literary convenience and should, of course, be understood to include the feminine gender as well.

ISBN (print): 978-1-956363-42-5

ISBN (digital download): 978-1-956363-43-2

ISBN (online): 978-1-956363-44-9

© 2013, 2015, 2018–2020, 2024 State Bar of Texas Austin, Texas 78711

Austin, Texas 78711

All rights reserved. Permission is hereby granted for the copying of any part of this publication by a photocopy or other similar process or by manual transcription, by or under the direction of licensed attorneys for use in the practice of law. No other use is permitted that will infringe the copyright without the express written consent of the State Bar of Texas.

Printed in the United States of America

Some of the material in Texas Business Organizations Manual is based on Texas Business Entities Forms Manual: Corporations, © 2005, 2008, 2010 State Bar of Texas.

Manual Committee

Russell Sloan, Austin, Chair

Heather Carson

April Prim

Robert Prim

Contributing Authors

Sara Giddings

Emily Morris

Shahara Wright

State Bar of Texas

2023-2024

Cindy V. Tisdale, President

Kennon L. Wooten, Chair of the Board

Radha Thiagarajan, Chair, Board Professional Development Subcommittee

Tina Green, Chair, Committee on Continuing Legal Education

Trey Apffel, Executive Director

Texas Bar Books

Sharon Sandle, Director

Elma E. Garcia, Assistant Director

Nicholas B. Goddard, Project Publications Attorney

Robert C. Cable, Publications Attorney

Elizabeth Floreani, Publications Attorney

Derek Smith, Publications Attorney

Roger Siebert, Senior Editor

Courtney Cavaliere, Editor

Lexi Clidienst, Editor

Jill Hoefling, Business Manager

Edward Morgan, Operations Manager

Travis Riddle, Production Supervisor

Jennifer Townsend, Production and Editorial Assistant

Holly Reddehase, Meeting Coordinator

Lara Talkington, Marketing Coordinator

Kevin Henderson II, Website Manager

Jennifer Karlsson, Web Content Specialist

Jennifer Perez, Web Content Specialist

Otto Nicli, Web Content Strategist

Lenila Carreno, Accounting Specialist

Preface

The State Bar of Texas is pleased to publish the 2024 edition of the Texas Business Organizations Manual. The manual is designed to provide practitioners with basic forms that address many of the issues that arise in the formation and operation of Texas business entities. Of course, each of the forms included in the manual is a template only and none of them is intended to be “one size fits all.” Accordingly, when using these forms, the attorney is cautioned to review them carefully and modify them as needed to meet the specific needs and particular circumstances of the client.

The digital version of this manual contains the complete text in word-searchable PDF format, along with word-processing forms. Custom toolbars accompany the word-processing forms and allow you to show, hide, print, and delete all instructional material in the forms as needed, whether you prefer to create forms on screen or print out a draft to work on paper. Other features include prompts to facilitate completing the forms.

The Texas Business Organizations Manual also is available online as well as in print and downloadable form. The many advantages of an online subscription include search functions, hyperlinks to statutes, cases, and other online resources, and downloadable forms. Importantly, practitioners wishing to propose changes or edits to the manual will be able to contact the editorial committee at books@texasbar.com for quick review and ongoing edits.

Forms available from the Texas secretary of state’s office are no longer reproduced in this manual. They are instead listed with URLs for accessing them in the relevant chapters’ “Additional Resources” sections.

We would like to acknowledge the Corporation Law committee of the Business Law section of the State Bar for its work in producing the Texas Business Entities Forms Manual: Corporations, the predecessor to this manual. Finally, we are indebted to the Business Organizations Manual committee and contributing authors for their work in updating the manual.

Introduction

§ 1   Scope of Manual

The Texas Business Organizations Manual is organized according to steps involved in the typical formation of limited liability companies, corporations, and partnerships and other professional entities as well as the conduct of operations such as maintenance, mergers, conversions, and termination. Chapters containing practice notes commentary concerning these topics are followed by a comprehensive section of forms.

The manual is designed to provide practitioners with basic forms that address many of the issues that arise in the formation and operation of Texas business organizations. Of course, each of these forms is a template only and none of them is intended to be “one size fits all.” Accordingly, when using these forms, the attorney is cautioned to review them carefully and modify them as needed to meet the specific needs and particular circumstances of the client.

The practice notes commentary provides short synopses of the law, designed to serve as a primer to the basic matters involved in business entity formation and organizational filing requirements. This commentary is, at most, black-letter law and does not try to resolve questions in controversial areas. For the attorney experienced with business organizations law, this commentary is a reminder of some of the basics; for the attorney not so experienced with the law, it is a guide to the major matters that the attorney should consider when forming a business entity.

§ 2   Digital Versions

The Texas Business Organizations Manual is available in two digital versions: online and downloadable. The online version, available by subscription, is accessible on a variety of platforms including PC, mobile phones, and tablets. The downloadable version contains the entire text of the manual as a single Adobe Acrobat PDF file.

Features of both versions include downloadable State Bar of Texas-copyrighted forms from the manual as editable Word files. In both versions, applicable Texas and federal case and statute citations in the practice notes and forms instructions are linked to case reports and main code sections cited via Fastcase online. Both versions are searchable and hyperlinked to allow for easy, rapid navigation to topics of interest.

Caveat: Note that the editable Word files of forms included in the digital versions contain instructional language as hidden text. Be aware that this language will be included in your completed forms unless you specifically delete it.

For more information about the online version, visit https://www.texasbarpractice.com/. For more information about the digital download including usage notes, see the material at the end of this introduction titled “How to Download This Manual.”

§ 3   Format and Content of Forms

The forms were prepared by experts in the business law field, and great care has gone into their preparation. The forms represent the best thinking of the practicing attorneys on the committee. Perfection, however, is hard to achieve, and attorneys using these materials must depend on their own expertise and knowledge of the law; there is no substitute in a particular case for the legal mind. Thus, care should be taken to ensure that any form used fits the specific situation.

1. Optional content
   Within major sections of the text of forms, optional paragraphs or items are usually identified by boxed instructions. Because the manual can cover only relatively common situations, language needed to address an atypical issue in a particular case may not appear in the form. The user must take care both to eliminate language appearing in the form that is not appropriate for the particular case and to add any language needed for the particular case that does not appear in the form.


2. Typeface conventions
   Two typefaces are used in the forms. Material in Times Roman (like most of this page) is appropriate for inclusion in a finished form. In contrast, Arial type is used for boxed instructions. When Arial type is used within the form itself (rather than in a box), it appears in boldface for emphasis.


3. Bracketed material
   Several types of bracketed material appear in the forms.
   Choice of terms. In a bracketed statement such as “[a majority/two-thirds],” the user must choose between the terms or phrases within the brackets. The choices are separated by forward slash marks. Alternative letters or phrases may also be indicated by the use of brackets. For example, “proxy[ies]” indicates a choice between the words “proxy” and “proxies.”
   Optional words. In a phrase such as “[Preformation] Common Stock Subscription,” the user must determine whether to include the word “Preformation.”
   Substitution of terms. In a bracketed statement such as “[name of corporation],” the user is to substitute the name of the corporation rather than typing the bracketed material verbatim.
   Instructions for use. Material such as “[include if applicable: . . .]” and “[describe item to be considered]” provides instructions for completing the finished form and should not be typed verbatim in the document.
   Subtitles. The titles of some forms are followed by a bracketed subtitle that is not to be typed as part of the form title. In the title “Plan of Conversion [Corporation to General Partnership],” for example, the bracketed words simply distinguish the form from another similarly titled form in the same chapter for ease of reference.


4. Blank lines
   Signature lines appear as blank lines. Spaces for dates, times, and amounts that would be filled in after the document is prepared also appear as blank lines. If an actual date, time, or amount should be inserted in the form when it is prepared, “[date],” “[time],” or “$[amount]” appears instead.


5. Language in boxes
   Language in boxes is not to be typed in the finished document but constitutes instructions, usually either telling the user whether to use the form language following the box, describing what information should be included at that point in the finished document or attached to it, or providing cautionary reminders about use of the form language. Caveat: Instructional language is presented as hidden text and will be included in the finished form unless specifically deleted.


6. Form numbers
   Forms are numbered in sequence by chapter. All forms begin with the number of the chapter, which is followed by a hyphen and the number of the form pertaining to the chapter. Forms 10-7, 12-3, and 15-1 consist only of clauses to be inserted in other forms. In this instance the clauses are numbered in sequence using the form number, followed by the number of the clause—for example, clause 12-3-1 in form 12-3.

§ 4   Corrections and Updates

In drafting the manual, the authors and editors devoted a great deal of effort to making it error free, but it undoubtedly contains some errors. We would appreciate your pointing out any errors you find in the manual as well as any revisions you believe are advisable. Please mail any corrections or suggestions to the following address:
Director, Texas Bar Books State Bar of Texas P.O. Box 12487 Austin, Texas 78711-2487 books@texasbar.com

Periodic updating of the manual is planned to reflect changes in the law. It is also expected that, over time, additional topics will be covered and the scope of coverage of existing topics will be expanded. We welcome your suggestions about new topics that you would find helpful. Please send your suggestions to the address shown above.