Texas Limited Liability Companies

In Villareal v. Saenz, two co-owners of a limited liability company sued each other regarding conduct surrounding a business divorce. 5-20-CV-00571-OLG-RBF, 2021 U.S. Dist. LEXIS 94183 (W.D. Tex. May 18, 2021). After the parties asserted allegations against each other, they entered into a release agreement. The parties agreed that “Saenz would assign his entire interest to ZroBlack LLC to Villarreal.” After the release, Saenz refused to return certain property to the company. Villarreal sued for breach of fiduciary duty and other claims.
Continue Reading Exiting Member of LLC May Still Owe Fiduciary Duties

The majority owners of private Texas limited liability companies (LLC’s) enjoy a mixed blessing when they also manage their companies.  Majority owners have the power to direct their private companies as they deem fit, but when they disregard the interests of minority owners, they may breach their fiduciary duties to the company.  The members of member-managed LLCs and the managers of manager-managed LLCs owe their companies the fiduciary duties of care, loyalty and obedience under Texas law, which does not permit them to disclaim their fiduciary duty of loyalty.  This post discusses significant legal and business issues faced by managers of Texas LLCs in guiding their companies to success while striving to maintain good relations with their minority owners.

Three significant legal and business challenges that LLC managing owners confront are: (i) the degree of control and extent to which minority owners are permitted to block major company decisions, (ii) whether majority owners have total discretion over profits distributions or whether a minimum requirement exists that requires profits distributions and (iii) the level of financial reporting requirements and related issues of transparency.  In regard to these challenges, majority owners who do not unfairly exploit their control over the business, issue profits distributions when appropriate and engage in open communications are more likely to foster harmonious relations with all company owners through both good times and bad.
Continue Reading Heavy is the Head That Wears the Crown: Overcoming Legal & Business Challenges Faced by Majority Owners of Texas Limited Liability Companies