Alter Ego in Texas

Texas courts previously provided plaintiffs a number of ways to hold owners of business entities liable through the use of “alter ego” or “veil piercing” methods.  Since the Castleberry decision in 1986, the Texas legislature has limited the abilities of plaintiffs to hold owners liable.  The Texas Business Organizations Code limits the liability of owners in several ways.  An owner cannot be held liable for any contractual obligation of the corporation or any matter relating to or arising from the obligation on the basis that the holder, beneficial owner, subscriber, or affiliate is or was the alter ego of the corporation or on the basis of actual or constructive fraud, a sham to perpetrate a fraud, or other similar theory. 

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IRS Right of Redemption

As attorneys in Houston, Texas, we are sometimes asked about foreclosure on property on which the IRS has a junior lien.  In accordance with IRC § 7425, the Internal Revenue Service has the right to redeem real property which was sold in nonjudicial foreclosure action by a third party to satisfy an outstanding encumbrance which has priority over the Notice of federal Tax Lien.  This means that after the property is sold at a foreclosure sale, the IRS can purchase the property at the price that the property was sold for at the foreclosure sale.  In accordance with Title 28 U.S.C. § 2410(c), the Internal Revenue Service has the right to redeem real property which is sold in a judicial sale where the United States’ position is junior

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Electronic Contracts and Signatures

As business attorneys in Texas, we are often asked whether electronic contracts and signatures are valid in Texas.  In Texas, a record or signature may not be denied legal effect or enforceability solely because it is in electronic form.  Likewise, a contract may not be denied legal effect or enforceability solely because an electronic record was used in its formation.  Additionally, if a law requires a record to be in writing, an electronic record satisfies the law, and an electronic signature satisfies a legal requirements for a signature.  An electronic record or electronic signature is attributable to a person if it was the act of the person.  The act of the person may be shown in any manner, including a showing of the

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Default Judgment Against Business Entities

In Texas, once a plaintiff has filed a lawsuit against a business entity (corporation, limited liability company, etc.) defendant, the plaintiff will attempt to serve the registered agent, president or vice president of said business entity. If the registered agent is served, the registered agent should forward the citation and petition on to the business entity.  In district and county courts, the business entity’s answer to the suit will be due by 10:00 am on the first Monday after the expiration of twenty days from the date the registered agent or officer was served with the citation. If the defendant does not answer by the date the answer is due, the court may render a default judgment against the defendant.  When a defendant

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Officer and Director Duties During Insolvency

As business attorneys in Houston, Texas we are sometimes asked about what duties are owed to creditors of an entity.  During times of solvency, directors and officers owe fiduciary duties to an entity and its owners.  Additionally, during times of solvency, a creditor’s relationship with an entity is a contractual relationship, and a fiduciary relationship does not exist between the officers/directors and the creditors of an entity. An entity becomes insolvent when it cannot pay its bills as they come due or when its total liabilities exceed its total assets.  When an entity becomes insolvent, the officers and directors owe the entity’s creditors a fiduciary duty because the creditors have essentially become the owners of the

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Texas “Loser Pays” Law

As business lawyers in Houston, Texas, we are often asked about the rights of defendants in litigation.  You may have read or heard in recent news that Texas legislators were debating about a “Loser Pays” law or “the English Rule” dealing with litigation in Texas.  The “Loser Pays” law passed and was signed into law on May 30, 2011 and becomes effective on September 1, 2011.  The law enhances defendants’ rights in litigation in Texas state courts.  The law changes some of the procedural rules of Texas litigation and also allows for the recovery of attorney’s fees under certain circumstances.  The “Loser Pays” law provides a new procedural vehicle for disposal of cases and the award of attorneys fees in Texas.  Additionally, the

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Texas Uniform Fraudulent Transfer Act

As business lawyers in Texas, we are sometimes asked about a creditor's remedies when a debtor transfers its assets to others in an effort to avoid its creditors.  The Texas Uniform Fraudulent Transfer Act gives creditors a cause of action against the transferee under certain circumstances.   If a debtor makes a transfer with the actual intent to hinder, delay or defraud a creditor of the debtor, a transfer is fraudulent as to that creditor.  Some factors that can be used to determine the actual intent of the debtor are whether: (1) the transfer or obligation was to an insider; (2) the debtor retained possession or control of the property transferred after the transfer; (3) the transfer or obligation was concealed; (4) before the

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Fair Labor Standards Act Employer

As attorneys in Houston, Texas, we are sometimes asked about whether individuals are considered employees under the Fair Labor Standards Act.  In making their determination, courts will look to the facts and the “economic realities” of the situation, rather than denying an alleged employee’s claim because of the person’s title as an “independent contractor”     The major factors a court will look at to determine the status of the employment relationship are: (1) degree of control exercised by alleged employer; (2) the extent of the relative investments of the worker and the alleged employer; (3) the degree to which the worker’s opportunity for profit or loss is determined by the alleged employer; (4) the skill and initiative

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Texas Registered Agent / Registered Office Requirements

As business lawyers in Houston, Texas, we are often asked questions about registered agent and office requirements. Every corporation, limited liability company, limited partnership, general partnership, professional corporation and professional association must have a registered agent and registered office in the state of Texas. This is true even when the corporation, company or partnership is a foreign entity. The registered agent allows the entity to be contacted, and takes delivery of: - Lawsuits, citations, and petitions if the entity is sued; - Notices regarding the status of the entity and its right to do business in Texas; - Tax notices; and - Notices and correspondence from the Texas Secretary of State and Texas

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Texas Property Tax Appraisal Protest Process

As lawyers in Houston Texas, we are often asked about how the property tax appraisal protest process works in Harris County and throughout Texas.   A taxpayer can protest their property value for property tax purposes by following the procedure below.  A taxpayer can protest the valuation of property for tax purposes for several reasons: •    the value the appraisal district placed on the property was too high; •    the property was unequally appraised; •    the appraisal district denied a special appraisal, such as open-spaced land, or incorrectly denied an exemption application; or •    several other less common reasons listed in Texas Tax Code Section 41.41. The taxpayer should file his or her Notice of Protest with the

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