What is a Texas PLLC?

PLLC stands for “professional limited liability company.” In fact, PLLCs are nothing more than LLCs (limited liability companies) that perform a professional service. Of course, this explanation is meaningless without first understanding the form and function of an LLC in Texas.

Choosing a business form is one of the most critical decisions that a fledgling business must make. There is no shortage of options: the sole proprietorship, general partnership, limited liability partnership (LLP), limited liability company (LLC), and corporation are just a few of the many business forms available to choose from.

Yet among this myriad of choices, one business form has skyrocketed in popularity in the last decade: the LLC. Relatively speaking, the LLC is a recent business innovation. It was created by legislatures to combine three highly desirable characteristics of businesses: (1) limited liability to owners; (2) pass-through tax treatment; and (3) flexible management structure.

Limited liability to owners is a characteristic that LLCs share with limited liability partnerships (LLPs) and corporations. This means that one owner of the business cannot automatically be held liable for another owner’s wrongdoing. Depending on the nature of that wrongdoing, the suing party may be able to recover from the LLC’s assets, or personally from the business owner at fault, but he or she cannot automatically recover personally from a business owner who was not involved. This may seem intuitive, but sole proprietorships and general partnerships—even today—do not shield innocent business owners in this way.

Pass-through tax treatment is a characteristic shared by nearly all business forms except for the Subchapter C Corporation. This is only to say that LLCs are not “double-taxed.” LLC business owners only pay income tax on their own income—they do not need to pay an additional tax on the LLC’s overall income.

Flexible management structure is the hallmark of the LLC. Most other business forms in Texas are bound by numerous statutory requirements. And while many of these requirements are “subject to agreement otherwise,” some provisions cannot be contracted around. In contrast, LLCs experience virtually complete freedom of contract regarding which terms they can dictate for their business. They are even able to disclaim the fiduciary duty of loyalty that would otherwise exist between business partners.

So how is a PLLC any different from a regular LLC? The only essential difference is that PLLCs are founded by “professionals” to conduct business within their profession. Texas law considers the term “professional” to include areas in which a license is necessary to practice (such as physicians, architects, and attorneys). But why would professionals chose a PLLC instead of an LLC? Simply put: Texas law says they have to.

The distinction is perhaps because lawmakers thought it necessary to reign in the near-absolute freedom of contract possessed by LLCs. Professionals are generally held to a higher standard than other occupations, and so it would seem counterintuitive to allow them to disclaim fiduciary duties to other partners or to clients.

The formation of a PLLC is governed by a separate provision of the Texas Business and Commerce Code than that of an LLC. Aside from this fact, the precise difference between a PLLC and LLC in practice is not obvious. It bears reemphasizing that LLCs and PLLCs are relatively recent business innovations, and case law—as well as statutory provisions—will likely continue to develop over the next several years.

***This article was prepared by Matt Lloyd and edited by Chloe Love.

"Loser Pays" Tort reform Legislation Making its Way Through Texas Legislature

On March 10, 2011, Rep. Brandon Creighton (R-Conroe) introduced House Bill 274 (HB 274) in the Texas Legislature. The proposed legislation is widely-touted as a "tort reform" or "loser pays" initiative. A watered-down version of the bill passed the Texas House of Representatives on May 9, 2011 by a vote of 96 Yeas, 49 Nays, and 3 Present, not voting. It is now pending in the Texas Senate.

The original, introduced version of the bill contained the following policy statement:

It is the policy of this state that all civil actions be disposed of fairly, promptly, and with the least possible expense to the litigants and to the state.

Although that express statement was removed from the bill as it worked its way through the Texas House of Representatives, such an underlying intent is still readily apparent. Only now, the initiative is touted as one proposing "certain reforms to make the civil justice system more efficient, less costly, and more accessible." Without a doubt, the bill is designed to change the landscape of fee and cost shifting related to lawsuits filed in Texas.

Among other provisions, the measure would "reform" the procedures under which parties may recover costs and attorneys' fees, and would also make available new procedures whereunder lawsuits may be dismissed on an expedited basis with fees and costs awarded against the party filing the dismissed suit.

The following highlights from the Bill Analysis of HB 274, as revised by the House Judiciary & Civil Jurisprudence Committee reflect the major features of the bill (C.S. = Committee Substitute, which is the version of the legislation that was approved by the full texas House):

Early Dismissal of Actions

C.S.H.B. 274 amends the Government Code to require the supreme court to adopt rules to provide for the dismissal of certain causes of action that the supreme court determines should be disposed of as a matter of law on motion and without evidence.

C.S.H.B. 274 amends the Texas Civil Practice and Remedies Code to authorize a court, in a civil proceeding, on a trial court's granting or denial, in whole or in part, of a motion to dismiss filed under the rules adopted by the Texas supreme court Section 22.004(g), Government Code, to award costs and reasonable and necessary attorney's fees to the prevailing party that the court determines are equitable and just.

Expedited Civil Actions

C.S.H.B. 274 amends the Texas Government Code to require the supreme court to adopt rules to promote the prompt, efficient, and cost-effective resolution of civil actions in which the amount in controversy, inclusive of all claims for damages of any kind, whether actual or exemplary, a penalty, attorney's fees, expenses, costs, interest, or any other type of damage of any kind, is more than $10,000 but does not exceed $100,000. The bill requires the rules to address the need for lowering discovery costs in these actions and the procedure for ensuring that these actions will be expedited in the civil justice system. The bill prohibits the supreme court from adopting rules that conflict with the Family Code, the Property Code, the Tax Code or Chapter 74 of the Civil Practice and Remedies Code.

Appeal of Controlling Question of Law

C.S.H.B. 274 amends the Texas Civil Practice and Remedies Code to authorize a trial court in a civil action, on a party's motion or on its own initiative and by written order, to permit an appeal from an order that is not otherwise appealable if the order involves a controlling question of law as to which there is a substantial ground for disagreement, and an immediate appeal may materially advance the termination of the litigation.

Recovery of Attorney's Fees

C.S.H.B. 274 amends the Civil Practice and Remedies Code to establish that the prevailing party, rather than only the claimant, may recover reasonable attorney's fees from an individual, corporation, or other legal entity if a claim is for breach of an oral or written contract. The bill makes conforming changes and specifies that the bill's provisions relating to the recovery of attorney's fees are effective September 1, 2011.

Allocation of Litigation Costs

C.S.H.B. 274 amends the Civil Practice and Remedies Code to redefine "litigation costs" to include reasonable deposition costs and to redefine "settlement offer." The bill specifies that provisions of law relating to offers of settlement do not apply to an action filed in a small claims court. The bill specifies that an offer to settle or compromise a claim that does not comply with provisions of law relating to making a settlement offer does not entitle any party, rather than only the offering party, to recover litigation costs.

C.S.H.B. 274 authorizes a defendant filing a declaration under provisions of law relating to making a settlement offer and any party with a claim against that defendant to make a settlement offer to settle all claims in the action between the parties. The bill specifies that the parties are not required to file a settlement offer with the court. The bill specifies that the litigation costs that may be recovered by the offering party are limited to those litigation costs incurred by the offering party after the date the rejecting party rejected the earliest settlement offer that entitles the party to an award of litigation costs. The bill repeals provisions of law relating to a limitation on recovery of litigation costs and to the awarding of litigation costs as an offset.

R L Wilson Law Firm Supports McAllister Park Little League Softball

Texas Contracts for Deed MUST Be Recorded

Many times, Sellers of real property under Texas Contracts for Deed hold those contracts "in pocket." The logic for this is that the Seller might default, in which instance no conveyance will take place. Thus, the thought goes, "why complicate the title chain by recording documents, when no conveyance has occurred?" In all honesty, this logic makes sense. Unfortunately, however, it flies in the face of the Recording Requirements prescribed by the Texas Property Code.

Section 5.076 requires that the Seller records the Contract for Deed (and the attached disclosure statement) with the County Clerk of the County in which the property is located WITHIN 30 DAYS AFTER THE CONTRACT IS EXECUTED.

Although the statute does not expressly provide a remedy for failure to record the Contract for Deed, it is likely that a recovery might be had under Texas law if the Buyer can demonstrate that he has been damaged as the result of the Seller's failure.

Annual Accounting Requirements Under the Texas Contract for Deed

I've previously posted articles on this real estate blog describing some of the pitfalls associated with buying and selling property in Texas under a Contract for Deed. A Contract for Deed is one type of an "executory contract," or contract that remains unperformed by both parties. Contracts for the purchase and sale of real estate that have not yet closed are executory in that the Buyer has not yet paid the full purchase price, and the Seller has not yet conveyed title by way of executing a deed.

Executory contracts of all stripes -- including contracts for deed -- have been under fire in texas for more than a decade. This disfavor results from frequent abuses of unsophisticated Buyers by malevolent Sellers. In order to stem these abuses, the Texas Legislature adopted sweeping revisions to the Texas Property Code in 2001.The major change was to make applicable statewide amended versions of provisions that had previously applied only in certain economically distressed (mostly border) counties. The revised provisions are set-forth in Subchapter D of Chapter 5 of the Texas Property Code ("Prop. Code").

One of the frequently violated provisions of Subchapter D is the annual accounting requirement of Texas Property Code Section 5.077. This provision REQUIRES Sellers under Texas Contracts for Deed to provide Buyers with an annual statement in January of each year that the Contract for Deed is in place.

The annual statement must include the following information:

(1) the amount paid under the contract;
(2) the remaining amount owed under the contract;
(3) the number of payments remaining under the contract;
(4) the amounts paid to taxing authorities on the purchaser's behalf if collected by the seller;
(5) the amounts paid to insure the property on the purchaser's behalf if collected by the seller;
(6) if the property has been damaged and the seller has received insurance proceeds, an accounting of the proceeds applied to the property; and
(7) if the seller has changed insurance coverage, a legible copy of the current policy, binder, or other evidence of insurance.

Failure to timely provide this statement can be costly to a Seller. The statute provides for liquidated damages, and attorneys' fees. In some instances, a Buyer might retain remedies under the Texas Deceptive Trade Practices Act. These penalties are most severe for Sellers who enter more than 2 Contracts for deed in a single year.

A savvy Seller of Texas real estate under a Contract for Deed should contact an experienced real estate attorney to advise them on all of the legal hurdles associated with this type of transaction, and to ensure that an innocent mistake doesn't end-up leading to a costly legal problem.

How to Change a Child’s Name in Texas

In Texas a guardian or parent must petition the court if they wish to change a child’s name. This is also the process that must be followed when an adult requests a name change, but in the case of a child, there are additional requirements that must be met. Our blog about changing an adult’s name can be found below.

If a name change is requested for a child, all parents or conservators of the child must be served with the petition requesting the name change by a constable or process server and the name change must be in the “best interest” of the child. As in the case of an adult name change, the petition must include specific personal information about the child. The party requesting the name change for the child must also disclose whether there has been a previous court order regarding the child and which court has continuing exclusive jurisdiction under the Texas Family Code. If the child is 10 years of age or older, the child’s written consent to the change of name must be attached to the petition.

As in the case of an adult name change, a hearing will be scheduled. Other parents or conservators f the child must be notified of the hearing and given the opportunity to contest the name change. If the name change is contested, the court will determine whether or not the name change is in the child’s best interest.

After an order changing the name has been signed by the judge, that person should notify the appropriate governmental agencies such as the Social Security Agency. If a child’s name has been changed and the child has been the subject of a previous court order such as a custody or child support order, a copy of the order changing the child’s name should also be sent to the Bureau of Vital Statistics.

Get Ready for Statewide Click It or Ticket Campaign: May 23 - June 5, 2011

The State of Texas versus your individual right to choose how you live.  It's an ongoing fight.  There's the No Refusal Campaign, where you're forced to give your blood in a blood test or your breath at the scene anytime a cop pulls you over for suspicion of drunk driving.  

There's also the Click It or Ticket campaign, where your choice on whether or not to wear that seat belt is taken away.  Well, not taken: you're just gonna get a ticket whenever you get caught.

Civil Liberties Versus Police Power

Lots of folk believe that it is unduly intrusive for the state government to force individuals to wear seat belts. And these aren't just zanies -- they include respected safety professionals like Peter Thompson, who served as the State of New Hampshire Safety Chief, and in that official capacity was against New Hampshire's implementing forced seat belt laws back in 2005.   

The argument against these types of law is simple:  seat belt laws invade your freedom unnecessarily.  These laws are not protecting the public at large - if you fail to wear one, the risk of harm is borne by you.  Therefore, forcing citizens under the police power to wear their seat belt crosses over the line of legitimate police power.   Not that this argument has stopped these laws from being passed in Texas and other states. 

May 23 - June 5, 2011: Texas Click It or Ticket Campaign Covers the Memorial Day Holiday

Here in Texas, it has been announced that Texas law enforcement are going to be on the lookout for drivers that are operating a motor vehicle without a seat belt over the Memorial Day Weekend in the latest Click It or Ticket Campaign. 

But be careful out there -- because Click It or Ticket goes to more than just a driver not wearing a safety belt: even those folk setting in the BACK SEAT can be ticketed because they aren't buckled up.

Other ways to get a ticket during the Click It or Ticket campaign?  

Not having kids younger than 8 years old buckled into either a child safety seat or booster seat unless they've grown past the legal limit of 4 feet 9 inches in height. 

What's the cost of not obeying the law?  A ticket totaling $250 plus court costs.