Frequently Asked Questions: Corporations & LLC

Q: What are some of the advantages of the corporate business entity?
A: The primary advantage of a corporation is the protection it can provide the owners of the corporation from creditors. Normally, the shareholders of a corporation are not personally liable for the actions of the corporation. To understand the benefit of doing business as a corporation, it must be distinguished from the "default" mode of doing business, which is as a sole proprietorship or a general partnership. A sole proprietorship is one person who does business without taking any legal steps to do business as another type of business entity. A general partnership involves two or more people operating a single business together when they took no legal steps to do business as another type of business entity. If a sole proprietorship or general partnership is sued and looses the lawsuit, the owner(s) will be personally liable if the judgment cannot be satisfied from business assets. Therefore, the primary advantage of a corporation is that it normally limits the liability of the owners of the business to the assets of the business.

Q: What are some of the disadvantages of the corporate business entity?
A: Some time and money must be spent in order to obtain permission from the Secretary of State to create a corporation. More time and expense is also necessary to maintain the corporation's status as a legal "person" with a legal existance that is seperate from that of its owners.

Q: What is a Limited Liability Company (LLC)?
A: An LLC is a sort of hybrid between a general partnership and a corporation. Like a corporation, an application to the Secretary of State must be made to create an LLC.

Q: What are some of the advantages of the LLC business entity?
A: An LLC can be created to allow the owners to run the business directly like a general partnership while still providing them with the limited liability features of a corporation. However, in Texas, a "close" corporation can be formed that also allows the owners to run the corporation directly like a general partnership. Both the LLC and the close corporation are available in Texas.

Q: What are some of the disadvantages of the L.L.C. business entity?
A: As with the corporation, some time and money must be spent in order to obtain permission from the Secretary of State to create an LLC. More time and expense is also necessary to maintain the LLC.

Q: Where can I find out more about Texas corporations and LLC's?
A: The Texas Secretary of State website is an excellent resource.

Frequently Asked Questions: Partnerships

Q: What is a general partnership?
A: It is an association of two or more persons operating as co-owners a business for profit. Two or more persons who meet this definition may be a partnership even if they do not know it. No formalities are required to start a general partnership. It is the "default" business form when two or more persons operate as co-owners a business for profit. In the absence of a formal partnership agreement, all rights and duties of the partners are defined by Texas statute.

Q: What is a written partnership agreement?
A: It is a written agreement between the partners that sets forth their rights and obligations with regard to the partnership. It is a means for the partners to vary their rights and obligations from the "default" arrangement defined by Texas statute, in some respects.

Q: What must a partnership's name be?
A: A partnership that does not disclose the names of all of its partners, or a partnership that includes words in addition to the partner's names, is doing business under an assumed name. Such a partnership must record a certificate in the county records of every county in which it does business. (See Texas Business and Commerce Code 36.10.)

Q: What is an LLP?
A: "LLP" stands for Limited Liability Partnership. It is different from a general partnership. This sort of business arrangement requires registration with the State.

Frequently Asked Questions: Landlord-Tenant Law

Q: What is a "tenant at will"?
A: A person holding an estate at will, which is an estate that is terminable at the will of either the lessor or the lessee.

Q: What is a "tenant at sufferance"?
A: A person holding an estate at sufferance, which is an estate that exists when a person wrongfully continues possession of the land after the termination of his right to possession. In Texas, a tenant in this holdover capacity is normally liable for rents under the same terms and conditions that were in effect prior to the end of his lease term and before the holdover period began.

Q: What is an "estate from period to period"?
A: This normally includes an estate from month to month and an estate from year to year. It is renewable at the option of the parties, and it has an indefinite duration. The estate from month to month is common in apartment rentals. Unless there is a written agreement that says otherwise, tenancies from month to month must have a 30-day notice before they are terminated.

Q: What is an "estate for years"?
A: It has a definite termination date, and almost always involves the existence of a lease.

Q: What is a "lease"?
A: It is a grant of an estate in land for a limited term, with certain conditions attached. A lease is a contract involving the transfer of an interest in real property. For instance, a lease for office space is a contract giving the occupant a right to possess the space for a period of time in exchange for the payment of money to the owner of the property.

Q: What is a "forcible entry and detainer"?
A: This is when a person enters the real property of another without legal authority or by force.

Q: What is a "forcible entry"?
A: This is either: (a)an entry without the consent of the person in actual possession of the property, or, (b)with respect to a landlord, an entry onto the property in the possession of the landlord's tenant at will or by sufferance, whether with or without the tenant's consent.

Q: What is a "forcible detainer"?
A: This is when a person refuses to surrender possession of real property on demand, if the person, after demand for possession is made in writing by a person entitled to possession of the property:(a)is a tenant or a subtenant willfully and without force holding over after the expiration of a lease under which the person claimed possession, (b)is a tenant at will or by sufferance, (c)is a tenant of a person who acquired possession by forcible entry, (d)has made a forcible entry on the possession of the person who acquired possession by forcible entry, or (e)has made a forcible entry on the possession of a tenant whose term has expired.

Q: How does a landlord evict a tenant in Texas?
A: The landlord must file a forcible entry and detainer suit. Absent a contractual agreement to the contrary, the lessor must give the lessee at least 3 days written notice to vacate the premises before filing suit. Such a suit must be filed in the justice of the peace court (justice court) in the precinct of the county in which the property is located.

Q: What is a "writ of possession"?
A: If a landlord is successful in his forcible entry and detainer suit, he will be issued a writ of possession. This writ is a court order telling the local sheriff or other authority to restore the landlord's possession of the property. Note that a writ of possession cannot be issued until the sixth day after the judgment has been entered in the landlord's favor in justice court.

Q: Why won't the writ of possession be issued to the landlord until the sixth day after judgment has been entered in his favor in justice court?
A: This gives the looser time to appeal to county court for a trial de novo. Such an appeal must be perfected within five days of the judgment being entered in justice court.

Q: What is a "trial de novo"?
A: This means that the entire case is heard again at county court as if the first trial at justice court never happened. Both sides completely reargue their cases and the county court is not bound to defer to any of the decisions made at justice court.

Q: How long do I have to file an appeal in an eviction action (forcible entry and detainer action)?
A: If you plan to appeal, do so right away. Texas Rule of Civil Procedure 749 says either party may appeal from a final judgment in a forcible entry and detainer action to the county court of the county in which the judgment is rendered by filing with the justice within five days after the judgment is signed, a bond to be approved by the justice, and payable to the adverse party, conditioned that he will prosecute his appeal with effect, or pay all costs and damages which may be adjudged against him. Within five days following the filing of the bond, the party appealing must give notice in accordance with Texas Rule of Civil Procedure 21a of the filing of the bond to the adverse party. (Note that when TRCP 749 says "five days", it generally includes Saturdays, Sundays, and legal holidays in this computation of time. See Texas Rule of Civil Procedure 4.)

Q: Can a landlord regain possession of leased property from a tenant that fails to pay rent fairly quickly?
A: Possibly. Texas Rule of Civil Procedure 740 says that the plaintiff may, at the time of filing his complaint, or thereafter prior to final judgment in the justice court, execute and file a possession bond to be approved by the justice in such amount as the justice may fix as the probable amount of costs of suit and damages which may result to defendant (in this case the tenant) in the event that the suit has been improperly instituted, and conditioned that the plaintiff will pay defendant all such costs and damages as shall be adjudged against plaintiff. The defendant must be notified by the justice court that plaintiff has filed a possession bond, and the defendant must be informed of various rules and procedures that are set forth in TRCP 740. In essence, these rules say that the defendant has a right to file a counterbond within six days to remain in possession of the property, or the defendant can demand a trial within six days from being served with notice of the filing of plaintiff's possession bond. If the defendant does neither prior to the expiration of the six day period, then the constable or sheriff shall place the landlord in possession of the property. If the defendant demands a trial within six days, and the plaintiff wins at trial, then the plaintiff must be placed in possession of the property five days after the plaintiff has won at justice court. To sum up, this procedure could allow a landlord to gain possession of the leased property in no longer than 12 days from the time the tenant is notified by the justice court that the landlord has filed a possession bond, and as few as seven days if the tenant takes no action in response to notice of the possession bond.

Q: What does the law say regarding "locking out", i.e., changing the locks on the property, of a tenant who is not current on his rent payments?
A: It depends on whether the property in question is residential or commercial. Chapter 92 of the Texas Property Code covers residential tenants. Chapter 93 covers commercial tenants. Locking out a residential tenant without judicial process is difficult, with detailed notice provisions. (See Sec. 92.0081 of the Property Code.) Although a residential tenant can sometimes be temporarily locked out for nonpayment of rent, the law ultimately requires the landlord to provide him with a new key, even if he doesn't pay his late rent. Locking out a commercial tenant without judicial process is easier, but still requires specific types of notice to the tenant. If a commercial landlord follows the procedures set forth in the law, he can maintain the lockout until the tenant pays the delinquent rent. (See Sec. 93.002 of the Property Code.)

Q: How does a residential tenant regain entry to the leased premises after an unlawful lockout?
A: Section 92.009 of the Property Code describes what a residential tenant must do to regain entry to the leased premises. The tenant must file with the justice court in the precinct in which the rental premises are located a sworn complaint for reentry, specifying the facts of the alleged unlawful lockout by the landlord or the landlord's agent. The tenant must also state orally under oath to the justice the facts of the alleged unlawful lockout. If the tenant complies with this procedure, and if the justice reasonably believes an unlawful lockout has likely occurred, the justice may issue, without notice to the landlord, a writ of reentry that entitles the tenant to immediate and temporary possession of the premises, pending a final hearing on the tenant's sworn complaint for reentry. The writ of reentry must be properly served on the landlord. The landlord is entitled to a hearing on the tenant's sworn complaint for reentry. The writ of reentry must notify the landlord of the right to a hearing. The hearing shall be held not earlier than the first day and not later than the seventh day after the date the landlord requests a hearing. If the landlord fails to request a hearing on the tenant's sworn complaint for reentry before the eighth day after the date of service of the writ of reentry on the landlord, a judgment for court costs may be rendered against the landlord.

Q: How does a commercial tenant regain entry to the leased premises after an unlawful lockout?
A: Section 93.003 of the Property Code describes what a commercial tenant must do to regain entry to the leased premises. The tenant must file with the justice court in the precinct in which the rental premises are located a sworn complaint for reentry, specifying the facts of the alleged unlawful lockout by the landlord or the landlord's agent. The tenant must also state orally under oath to the justice the facts of the alleged unlawful lockout. If the tenant has complied with this procedure, and if the justice reasonably believes an unlawful lockout has likely occurred, the justice may issue, without notice to the landlord, a writ of reentry that entitles the tenant to immediate and temporary possession of the premises, pending a final hearing on the tenant's sworn complaint for reentry. The writ of reentry must be properly served on the landlord. The landlord is entitled to a hearing on the tenant's sworn complaint for reentry. The writ of reentry must notify the landlord of the right to a hearing. The hearing shall be held not earlier than the first day and not later than the seventh day after the date the landlord requests a hearing. If the landlord fails to request a hearing on the tenant's sworn complaint for reentry before the eighth day after the date of service of the writ of reentry on the landlord, a judgment for court costs may be rendered against the landlord.

Q: Where can I find out about evictions in Collin County?
A: Try this web site.