Organizational Documents Attorneys in The Woodlands

Texas Business Law Attorneys – Organizational Documents

Failure to have the proper organizational documents from the start will put any newly formed closely held company behind the eight ball. Sometimes, permanently.

It is extraordinarily important to memorialize the founding of a business with the proper organizational documents. They set the rules for the company, rules that will be followed for years.

A few of the key organizational documents that would be required or recommended when forming and operating a closely held company in Texas are:

• Certificate of Formation - This document, filed with the Texas Secretary of State, formally registers the entity and outlines basic provisions like name, registered agent, business purpose, etc.
• Company Agreement - An operating agreement for an LLC or a shareholder's agreement for a corporation details governance, capital structure, distributions, membership interests, etc.
• Bylaws - If incorporated, bylaws establish procedural matters like director and shareholder meetings, officers, stock issuance, etc.
• Board resolutions - Written board resolutions documenting major board decisions concerning policies, actions, officer elections, stock issuance, bank accounts, etc.
• Owner's buy-sell agreement - This contract between owners sets terms and restrictions for the transfer of ownership interests between each other.
• Employment agreements - Written employment contracts governing compensation, duties, and termination of key executives and officers.
• Intellectual property assignments - Any patents, trademarks, copyrights, or trade secrets should be properly assigned and documented.
• Licensing agreements - If applicable, contractual licensing terms for the use of any intellectual property or technology rights.
• Equity incentive plan - A stock option or restricted stock plan for employee incentives, if offering company stock.

Business Law and Organizational Documents

Here are some key drafting considerations for preparing organizational documents for a closely held Texas company:

• Tailor to the client’s specific needs - there is no one-size-fits-all approach so customize documents accordingly.
• Maintain flexibility for future changes - Draft provisions allowing flexibility as needs evolve while maintaining sound structure.
• Set clear decision-making procedures - Establish clear processes and thresholds for making major business decisions.
• Address dispute resolution - Include mediation, arbitration, or other alternative dispute resolution provisions.
• Comply with Texas statutes - Ensure documents comply with all requirements of Texas statutes governing entity formation and governance.
• Avoid conflicts with other documents - Review other agreements like leases, loans, and contracts for any conflicting provisions.
• Include key transfer restrictions - Address how new members can be admitted, and existing ownership interests can be transferred or sold.
• Define capital structure and contributions - Clearly establish initial ownership percentages, contribution amounts, and share/unit issuance process.
• Set distributions and dividends policy - Determine standards and procedures for proportionate and non-proportionate profit distributions.
• Establish officer roles - Identify officer positions and define respective duties, authority, and decision-making power.
• Review with competence - Carefully review all documents related to the entity with experience in closely held Texas businesses.