Question 1

What is Lone Star Counsel?

Accepted Answer

Lone Star Counsel is a private Texas business, wealth, and legacy law firm headquartered in Frisco (across from The Star) with offices in Round Rock, Boerne, The Woodlands, and Sugar Land. The firm's founding partner, Darryl V. Pratt, is dually licensed as a Texas attorney and a Certified Public Accountant — which is why our positioning is 'Attorney. CPA. Business Advisor.' We advise entrepreneurs, physicians, franchise investors, Indian and South Asian families and business owners, and Texas families through every stage of the business and wealth continuum.

Question 2

What does 'Attorney. CPA. Business Advisor.' actually mean?

Accepted Answer

It means clients receive integrated counsel from a single firm whose principal holds both the Texas bar license and the CPA license. Most matters we handle — buy-sells, succession plans, asset-protection trusts, M&A, restructuring — sit at the intersection of legal and tax architecture. Having both disciplines in-house means the structure is right the first time, with fewer hand-offs and no cross-charging between an attorney and an outside accountant.

Question 3

Where is Lone Star Counsel located?

Accepted Answer

Our principal offices are at 2591 Dallas Parkway, Suite 300, Frisco, Texas 75034 — across from The Star. We maintain four additional Texas offices: Round Rock (serving Austin, Round Rock, Georgetown), Boerne (San Antonio and the Hill Country), The Woodlands (North Houston and Spring), and Sugar Land (West Houston and Fort Bend County). The principal office direct line is (972) 712-1515; our toll-free statewide line is (888) 517-4575.

Question 4

Who do you typically represent?

Accepted Answer

Our clientele is deliberately narrow: closely held business owners, physicians, dentists, veterinarians, optometrists, chiropractors, CPAs, financial planners, other licensed professionals, franchise investors, families seeking wealth preservation and succession, trustees and executors, and a meaningful number of Indian and South Asian families and business owners — a community we specifically serve from our Sugar Land office in Fort Bend County.

Question 5

What is a Texas Series LLC and when should I use one?

Accepted Answer

A Texas Series LLC is a single parent LLC that can establish internal protected 'series,' each with its own assets, members, and liability shield — authorized under Chapter 101 of the Texas Business Organizations Code. It is most useful when an owner holds multiple income-producing assets (rental properties, franchise units, separate lines of business) and wants asset-segregation without paying to form and maintain a separate LLC per asset. Lone Star Counsel drafts Series LLCs, the inter-series operating agreement, and the bookkeeping protocols required to preserve the protection.

Question 6

Do I need a buy-sell agreement for my Texas business?

Accepted Answer

If your business has more than one owner — or you plan to add one — yes. A buy-sell agreement is the document that controls what happens to an owner's interest on death, disability, divorce, departure, deadlock, or default. Without it, Texas default rules govern, and they rarely produce the outcome the owners expected. We draft cross-purchase, redemption, and hybrid buy-sells for closely held Texas businesses, professional practices, and franchise operators, and we coordinate the funding (life insurance, sinking fund, or installment).

Question 7

What is Chapter 11 Subchapter V and is it right for my business?

Accepted Answer

Subchapter V is a streamlined Chapter 11 small-business reorganization track created by the 2019 Small Business Reorganization Act. It permits eligible debtors (currently those with non-contingent debts under the Subchapter V cap) to reorganize in a much faster, less expensive proceeding than traditional Chapter 11 — no committee of unsecured creditors, no absolute-priority rule barrier, and a court-appointed trustee who acts as a facilitator. It is often the right tool for closely held Texas businesses, professional practices, and franchise operators whose problem is one specific bad piece of debt rather than a broken business. Lone Star Counsel handles Subchapter V cases and the strategic out-of-court restructurings that often precede them.

Question 8

What is a dynasty trust and do I need one in Texas?

Accepted Answer

A dynasty trust is an irrevocable trust designed to hold assets for multiple generations — children, grandchildren, and beyond — outside the federal estate tax system at each generational transfer. Texas permits long-duration trusts and is one of the most favorable jurisdictions for them. Dynasty trusts are most valuable for families with assets meaningfully above the federal estate-tax exemption, families that own a successful operating business, and families that want professional management of inherited wealth across generations.

Question 9

What is the difference between a revocable living trust and an asset protection trust?

Accepted Answer

A revocable living trust is a probate-avoidance and incapacity tool — you can change it, you control the assets, and creditors of the grantor can reach them. An asset protection trust is irrevocable — you give up control in exchange for protection from future creditors. Texas does not have a domestic asset-protection-trust statute, so Texas residents who want this protection typically use a hybrid structure or a sister-state DAPT jurisdiction. Lone Star Counsel structures both, often layered together with LLCs and properly tailored insurance.

Question 10

What is a Miller Trust and when does someone need one?

Accepted Answer

A Miller Trust — formally a Qualified Income Trust — is a Texas-specific tool that allows an applicant whose monthly income exceeds the Medicaid long-term-care income cap to nevertheless qualify for Medicaid benefits. Income is directed into the trust each month and paid out according to strict rules. It is one of several elder-law instruments we draft to help families afford long-term care without spending down a lifetime of assets.

Question 11

Why do physicians and other healthcare professionals work with Lone Star Counsel?

Accepted Answer

Healthcare-practice owners face a specific stack of issues: corporate-practice-of-medicine constraints, professional-entity structuring (PA, PLLC), MSO arrangements, asset protection from professional-liability exposure, practice succession on partner retirement, and integrated estate planning. Because our principal is both attorney and CPA, we can address the legal structure, the tax structure, and the financial implications in a single engagement — without you needing to retain a lawyer, an accountant, and a practice consultant separately.

Question 12

Why is Lone Star Counsel well-suited for Indian and South Asian families and business owners?

Accepted Answer

Fort Bend County and the greater Houston area are home to one of the largest South Asian populations in the United States. Our Sugar Land office is purpose-built to serve Indian and South Asian individuals, families, entrepreneurs, physicians, professionals, and business owners across the full lifecycle: U.S. entity formation for foreign nationals, pre-immigration tax planning, cross-border U.S.–India business transactions, multi-jurisdictional estate planning that accounts for both U.S. and Indian rules, and the careful business and trust structures multi-generational Indian-American families require. The work is at once Texan and global. We assist U.S. citizens, permanent residents, Indian nationals, non-U.S. citizens, and families with cross-border connections.

Question 13

What is pre-immigration tax planning and when should I do it?

Accepted Answer

Pre-immigration tax planning is the work done before a foreign national becomes a U.S. tax resident — typically before the day they would otherwise meet the substantial-presence test or obtain a green card. Once you are a U.S. tax resident, you are taxed on worldwide income and your foreign assets become subject to U.S. reporting (FBAR, Form 8938, PFIC rules, CFC rules). Decisions about asset sales, trust formation, gifts, and entity restructuring made before residency triggers can preserve substantial value. Lone Star Counsel handles these matters in coordination with Indian counsel.

Question 14

How do I become a client?

Accepted Answer

Begin with our four-step intake form at /intake or call our principal office in Frisco at (972) 712-1515. We will schedule an initial conference at one of our five Texas offices or by video. We accept new matters selectively — by design — and most engagements begin with a scoped strategic conference before any longer-term retention.

Question 15

Do you take cases outside Texas?

Accepted Answer

Our practice is Texas-centered. We are admitted in Texas and accept Texas-based engagements involving Texas businesses, Texas residents, or Texas-situated assets. Cross-border U.S.–India matters and multi-state structures are routinely handled in coordination with co-counsel where required.

Question 16

What is the PEAK American Financial line?

Accepted Answer

The (866) 511-7722 line is reserved exclusively for clients and representatives of PEAK American Financial. General prospective clients should call our toll-free statewide line at (888) 517-4575 or the Frisco direct line at (972) 712-1515.

Question 17

Should I buy the assets or the LLC interests of a Texas business?

Accepted Answer

For most Texas buyers the answer is assets, not equity. An asset purchase lets the buyer take the assets it wants, leave known and unknown liabilities behind, obtain a new depreciable basis in the acquired property, and start with a clean corporate history. A membership-interest or stock purchase transfers the entity itself — every asset AND every liability, including tax audits, litigation exposure, employment claims, and off-balance-sheet obligations — which is usually acceptable only for a sophisticated buyer, a regulated business whose licenses do not transfer, or a transaction with representations-and-warranties insurance in place. Lone Star Counsel structures both, and the choice is a matter of tax, liability, and diligence analysis rather than preference.

Question 18

Who prepares an Asset Purchase Agreement in Texas?

Accepted Answer

The Asset Purchase Agreement (APA) is prepared by counsel — typically buyer's counsel — after the parties have signed a Letter of Intent that resolves price, structure, and the key business terms. In a Texas transaction the drafting attorney should have both business-transactional and Texas-specific experience: the APA must interact correctly with the Texas Business Organizations Code, Texas bulk-transfer and tax-clearance rules, Texas real-property statutes if real estate is included, Texas non-compete law, and the Texas Uniform Commercial Code. Lone Star Counsel prepares APAs for buyers and sellers of Texas businesses ranging from single-location professional practices to multi-unit operators.

Question 19

What should be included in a Texas Asset Purchase Agreement?

Accepted Answer

A complete Texas APA identifies the acquired and excluded assets, the assumed and excluded liabilities, the purchase price and its allocation (see IRC §1060), the payment mechanics, closing conditions, representations and warranties, indemnification and survival terms, restrictive covenants, employee treatment, transition services, disclosure schedules, and a defined-terms and interpretation section. The document is also the vehicle for third-party consents (landlord, franchisor, key contracts), lien releases, transfer of intellectual property, transfer of permits and licenses, and any escrow, holdback, or earn-out mechanics. In Texas, the APA is generally accompanied by a bill of sale, assignment-and-assumption agreements, real-property conveyance documents where applicable, and officer's and secretary's certificates.

Question 20

What liabilities does a buyer assume in a Texas asset purchase?

Accepted Answer

Only the liabilities specifically identified as 'Assumed Liabilities' in the APA — and any liabilities that transfer by operation of law regardless of the contract. In Texas the categories of liability that can attach to a buyer despite an asset-only structure include (1) successor liability for products, environmental, and certain employment claims, (2) unpaid Texas sales, use, franchise, and unemployment taxes if a tax-clearance certificate is not obtained, (3) obligations under assumed contracts and leases from the transfer date forward, and (4) claims under bulk-transfer or fraudulent-conveyance theories in narrow circumstances. A well-drafted APA and a disciplined closing process manage each of these.

Question 21

How is purchase price allocated in a Texas business acquisition?

Accepted Answer

Purchase price allocation is governed by Section 1060 of the Internal Revenue Code and reported by both parties on IRS Form 8594. The parties allocate the total consideration among seven asset classes — from cash and cash-equivalents at the top to goodwill and going-concern value at the bottom — using the residual method. Because the allocation drives the buyer's depreciation and amortization deductions AND the character of the seller's gain (ordinary vs. capital), it is typically negotiated in the APA rather than left to post-closing determination. Lone Star Counsel coordinates the legal allocation with the parties' tax advisors so the reported Form 8594s match.

Question 22

Should the buyer or the seller draft the Asset Purchase Agreement?

Accepted Answer

The buyer's counsel usually drafts the APA. Drafting confers meaningful control: the buyer's counsel sets the definitions, the default allocation, the scope of the assumed liabilities, the survival periods, the indemnification caps and baskets, and the disclosure-schedule framework. Seller's counsel then negotiates. In smaller transactions — under roughly $2 million — the parties sometimes agree to a joint-draft or use a seller-prepared template to save costs, but the leverage disadvantage to the non-drafting party is real and should be evaluated deliberately.

Question 23

What happens to employees when a Texas business is sold?

Accepted Answer

In an asset purchase, employees do not automatically transfer with the assets. Practical practice is that the buyer terminates the seller's employees at closing and rehires the ones it wants on the buyer's payroll effective the next business day. This structure requires attention to WARN Act notice thresholds for larger workforces, Texas final-wage timing under the Texas Payday Act, treatment of accrued PTO under seller's policies, transfer of benefit-plan enrollment (often via a new plan on the buyer's side), and Section 338 or asset-vs-equity treatment of qualified retirement plans. Restrictive covenants for key employees — non-compete, non-solicit, confidentiality — are typically executed at closing rather than being assumed from prior employment.

Question 24

Can the seller finance part of the purchase price in a Texas asset purchase?

Accepted Answer

Yes — seller financing is common in Texas business sales, particularly for transactions under $10 million, professional-practice sales, and family or management buyouts. The seller carries a portion of the price through a promissory note, secured by the acquired assets under Texas Business & Commerce Code Article 9, sometimes personally guaranteed by the buyer's principals, and often subordinated to a senior lender. The APA and the seller-note package should address payment terms, prepayment rights, default remedies, offset against indemnification obligations, and coordination with any senior lender's intercreditor requirements.

Question 25

Should I sign an LOI before hiring an attorney in a Texas business acquisition?

Accepted Answer

No. The Letter of Intent — even when labeled 'non-binding' — sets the price, the structure (asset vs. equity), exclusivity, the diligence period, and the framework for the definitive agreement. Provisions the parties treat as boilerplate at the LOI stage frequently reappear as fully binding terms in the APA that the non-drafting party then cannot re-negotiate without appearing to move goalposts. Engaging counsel before the LOI is signed is one of the highest-leverage decisions in the transaction. Lone Star Counsel reviews LOIs on rapid turnaround to preserve deal timing.

Question 26

What due diligence should I conduct before buying a Texas business?

Accepted Answer

Buyer diligence in a Texas transaction typically spans (1) financial — quality of earnings, working-capital norms, and revenue concentration; (2) legal — corporate records, entity good standing with the Texas Secretary of State, litigation, permits and licenses, real estate title, environmental, and material contracts; (3) tax — Texas franchise, sales & use, unemployment, and property tax clearance; (4) employment — I-9 compliance, wage-and-hour exposure, restrictive covenants, and benefit-plan liabilities; (5) intellectual property — registered and common-law marks, trade secrets, and IP assignments from employees and contractors; and (6) operational — customer contracts, supplier concentration, and systems. Diligence findings are captured on the seller's disclosure schedules and drive representation carve-outs, indemnity coverage, and purchase-price adjustments.

Question 27

What is the difference between an asset purchase and a stock or equity purchase in Texas?

Accepted Answer

An asset purchase transfers specific assets and specifically assumed liabilities via a bill of sale, assignments, and (where applicable) real-property deeds — the buyer selects what it takes. A stock or equity purchase transfers the ownership of the entity itself — every asset and every liability comes with it, by operation of law, unless separately restructured before closing. Texas transactions favor asset purchases for tax and liability reasons; equity purchases are used when licenses do not transfer, when a specific contract has a change-of-control restriction that survives an asset transfer, or when the seller demands equity treatment for capital-gains reasons and the parties negotiate representations-and-warranties insurance to close the diligence gap.

Question 28

How long does a typical Texas asset purchase take from LOI to closing?

Accepted Answer

For a transaction between roughly $1 million and $20 million, the typical timeline from executed LOI to closing is 60 to 120 days. Diligence and definitive-agreement drafting run in parallel and consume the first 45 to 75 days; consents, financing contingencies, and pre-closing conditions absorb the remainder. Regulated industries (healthcare, financial services, franchise systems), SBA-financed transactions, and deals with real estate typically extend the timeline by 30 to 60 days. Lone Star Counsel builds the closing calendar at LOI stage so timing risks are identified before they become critical-path issues.

Question 29

What is a Section 1060 allocation and why does it matter?

Accepted Answer

IRC §1060 requires the parties to a business asset acquisition to allocate the purchase price among seven categories of assets using the 'residual method' — cash, actively traded securities, accounts receivable, inventory, tangible personal property, intangible property (Section 197 intangibles), and goodwill/going-concern value. The allocation determines the buyer's future depreciation and amortization deductions and the character of the seller's gain (ordinary income vs. capital gain). Buyers generally want more allocated to inventory and depreciable equipment; sellers generally want more allocated to goodwill. The negotiated allocation is memorialized in the APA and reported by both parties on IRS Form 8594.

Question 30

Do I need a title company or a business escrow for a Texas asset purchase?

Accepted Answer

It depends on whether real estate is included. If the transaction includes Texas real property, a Texas title company issues title insurance and typically handles the closing as escrow agent for the entire transaction. If no real estate is involved, the parties often close directly attorney-to-attorney with the buyer's funds held in an attorney trust (IOLTA) account or with a bank or dedicated business-escrow provider handling holdbacks and post-closing escrow funds. Choice of closing mechanic is negotiated in the APA.

Question 31

What are the standard representations and warranties in a Texas Asset Purchase Agreement?

Accepted Answer

Seller representations typically cover organization and good standing, authority and enforceability, title to the acquired assets, absence of liens, financial statements, absence of undisclosed liabilities, taxes, litigation, compliance with law, permits and licenses, material contracts, employee matters, benefit plans, intellectual property, real property, environmental matters, and — often — a catch-all 'full-disclosure' representation. Buyer representations are narrower and cover authority, financing, and no-conflicts. Each representation is generally qualified by the disclosure schedules and by 'knowledge' and 'materiality' qualifiers negotiated in the APA.

Question 32

What is representations and warranties insurance and when should I get it?

Accepted Answer

Representations and warranties (R&W) insurance is a policy — typically buyer-side — that indemnifies the buyer for losses arising from a breach of the seller's representations in the APA. It is used most commonly in transactions above roughly $10 million and in deals where the seller (often private equity or a retiring owner) wants a clean exit without a large indemnification escrow. Premiums typically run 3–5% of the coverage limit with a retention of 0.5–1% of enterprise value. R&W insurance is not standard for smaller Texas transactions, but Lone Star Counsel evaluates it in every mid-market matter.

Question 33

Can I use a non-compete in a Texas business sale?

Accepted Answer

Yes. Texas Business & Commerce Code §15.50 permits non-competition agreements in the business-sale context and is generally more permissive than in the employment context. The typical seller non-compete in a Texas APA runs three to five years, restricts a defined geography (often statewide or nationwide for a technology or professional-services business), and covers competition, solicitation of customers, and solicitation of employees. Enforceability depends on reasonableness of duration, geography, and scope of restricted activity relative to the consideration paid and the interest protected — Lone Star Counsel drafts the covenant to match those factors.

Question 34

Does Texas still have a bulk-sales law?

Accepted Answer

Texas repealed its version of UCC Article 6 (Bulk Transfers) in 1993, so the classical bulk-sales notice regime no longer applies to most Texas asset purchases. Two important successor-style rules remain: (i) Texas Tax Code §111.020 requires the buyer of a business to withhold a portion of the purchase price sufficient to satisfy the seller's unpaid Texas sales, use, franchise, and unemployment taxes unless the seller produces a certificate of no tax due from the Comptroller, and (ii) common-law successor-liability doctrines may still apply in narrow circumstances (fraudulent transfer, mere continuation, de facto merger). Both are managed through closing conditions in the APA.

Question 35

Does Texas sales tax apply to the sale of a business?

Accepted Answer

The 'occasional sale' exemption in Texas Tax Code §151.304 generally exempts the sale of an entire operating business (or an identifiable segment) from Texas sales and use tax — provided the transaction meets the statutory requirements. Tangible personal property sold outside the exemption, or in a partial-asset sale that does not qualify, may be subject to sales tax. Buyers routinely request a Texas Comptroller certificate of no tax due and structure the transaction to qualify for the occasional-sale exemption; sellers of specific asset categories (motor vehicles, aircraft, alcohol) require separate treatment.

Question 36

What is a working-capital adjustment at closing?

Accepted Answer

A working-capital adjustment is a purchase-price mechanic that trues up the price after closing to reflect the actual net working capital delivered to the buyer versus a negotiated target. The parties agree on a 'target working capital' at signing (often a trailing-twelve-month average); at closing they estimate; within 60–90 days after closing they reconcile against the actual balance sheet; and the price is adjusted dollar-for-dollar. The mechanic is standard in transactions above roughly $1 million and prevents the seller from stripping working capital between signing and closing.

Question 37

What is an earn-out and when should I use one?

Accepted Answer

An earn-out is contingent consideration paid to the seller after closing based on the acquired business's post-closing performance — typically revenue, EBITDA, or milestone-based. Earn-outs bridge valuation gaps when the parties disagree on the projected future performance and are common in professional-practice sales, technology transactions, and deals with meaningful customer-concentration risk. They introduce significant post-closing conflict potential (operating covenants, allocation of shared costs, accounting methodology) and require careful drafting. Lone Star Counsel uses earn-outs where they solve a valuation problem and avoids them where a fixed-price with escrow would produce the same commercial outcome.

Question 38

What is an escrow holdback in a Texas APA?

Accepted Answer

An escrow holdback is a portion of the purchase price (typically 5–15%) that is held by a neutral escrow agent after closing to satisfy the seller's post-closing indemnification obligations, working-capital adjustments, or specific identified risks. Escrows generally run 12–24 months for general indemnity matters and longer for specific carve-outs (taxes, environmental, IP). The APA specifies the escrow amount, the release schedule, the claims process, and the dispute-resolution mechanism. A well-drafted escrow provides real security to the buyer without unduly encumbering the seller's proceeds.

Question 39

Do I need franchisor or landlord consent to close a Texas asset purchase?

Accepted Answer

Almost always. If the target operates under a franchise agreement, the franchisor's consent is a condition to transfer and typically requires the buyer to sign a new franchise agreement, pay a transfer fee, and complete franchisor training. If the target occupies leased space, the landlord's consent to assignment (or issuance of a new lease) is required in the great majority of Texas commercial leases. Both consents should be pursued in parallel with definitive-agreement drafting; either can extend the timeline by 30–60 days and either can materially change the deal economics.

Question 40

What licenses transfer with a Texas business in an asset purchase?

Accepted Answer

As a general rule, professional and regulatory licenses do not transfer. Texas medical, dental, veterinary, legal, engineering, real-estate-broker, and similar professional licenses are personal to the licensee. Facility licenses (pharmacy permits, ambulatory-surgery-center licenses, TABC permits, DOT authorities) generally require an application by the buyer and issuance in the buyer's name — sometimes with a transition period during which the seller's license remains in effect. City and county licenses, DBA registrations, sales-tax permits, and unemployment-tax accounts all require buyer-side registration. Lone Star Counsel prepares a licensing checklist at LOI stage in every regulated-business transaction.

Question 41

How do I protect trade secrets during due diligence?

Accepted Answer

The mutual non-disclosure agreement signed before diligence is the first line of protection, but a well-drafted NDA does more than restrict use — it defines the diligence perimeter, limits access to a small circle of named recipients, requires the recipient to identify representatives before they gain access, and expressly prohibits reverse engineering, poaching of employees, and use of the information in the recipient's own business. Sensitive information (customer lists, source code, algorithms, pricing) is staged into a clean-team review, produced last, and often watermarked. Lone Star Counsel negotiates NDAs and structures diligence phasing to reflect the sensitivity of the information at each stage.

Question 42

What happens to customer contracts when a Texas business is sold?

Accepted Answer

In an asset purchase, customer contracts are typically 'assigned' from the seller to the buyer via an assignment-and-assumption agreement — but many contracts require the customer's consent to assignment, particularly those that contain change-of-control provisions or that were with the seller as a specific licensed professional. Contracts with no assignment restriction transfer with a simple assignment and notice to the customer; restricted contracts require written consent obtained before closing. Government contracts and long-term service agreements are frequently the diligence items with the greatest potential to affect deal timing.

Question 43

Should the buyer form a new LLC to acquire the assets?

Accepted Answer

Yes — in nearly every case. Acquiring assets into a newly formed 'NewCo' LLC provides (i) a clean corporate record with no historical liabilities, (ii) a discrete asset-protection perimeter for the acquired business, (iii) a clean entity for post-closing financing and future exit, and (iv) tax-election optionality (Subchapter S election, disregarded-entity vs. partnership treatment, tax-year selection). The NewCo is generally formed 30–60 days before closing so it can execute financing documents, secure permits and licenses, and open bank accounts under its own EIN. Lone Star Counsel forms the acquiring entity as part of every buyer-side transaction.

Question 44

What is successor liability and how do I avoid it in a Texas asset purchase?

Accepted Answer

Successor liability is a doctrine under which a buyer of assets is held responsible for a seller's obligations despite the parties' intent that liabilities remain with the seller. Texas recognizes four traditional exceptions to the general no-successor-liability rule: (1) express assumption in the APA, (2) de facto merger, (3) mere continuation of the seller, and (4) fraudulent transfer to escape liability. Additional statutory successor rules apply to certain taxes, unpaid wages, and (in narrow circumstances) product-liability and environmental claims. A well-drafted APA, arm's-length pricing, distinct ownership and management, and disciplined use of the Texas Comptroller's tax-clearance process manage each exception.

Question 45

Do I need SBA financing approval before signing the APA?

Accepted Answer

Not before signing — but the APA must be structured to be SBA-fundable if the buyer intends to use SBA 7(a) financing. Key SBA requirements include: no seller retention of ownership post-closing (SBA generally disallows seller equity rollovers, though a subordinated seller note with a 24-month standby is permitted), full escrow of the seller note under specific SBA terms, restrictions on earn-outs, life-insurance requirements for owners of the buyer, and specific personal-guaranty rules. The APA is drafted with an 'SBA compliance' section and the LOI should identify SBA financing so the lender's underwriter can be engaged in parallel with diligence.

Question 46

How is intellectual property transferred in a Texas asset purchase?

Accepted Answer

Trademarks, copyrights, patents, and domain names transfer through a written assignment executed at closing and recorded with the applicable registry (USPTO for federal marks and patents, U.S. Copyright Office for federal copyrights, the registrar for domain names). Trade-secret protection travels with the acquired confidential information and requires the buyer to continue reasonable measures to preserve secrecy. Common-law marks (unregistered marks used in commerce) also transfer, along with the associated goodwill. Lone Star Counsel prepares the IP assignment package as part of every business-acquisition closing and files USPTO and Copyright Office recordations post-closing.

Question 47

What is business succession planning?

Accepted Answer

Business succession planning is the coordinated legal, tax, and financial preparation for the transfer of ownership and leadership of a privately held business. A complete plan addresses who will own the business next, who will run it, how the transfer will be funded and taxed, and how the transition integrates with the owner's estate plan and personal financial goals. In Texas the plan is typically composed of a buy-sell agreement, updated organizational documents, employment and restrictive-covenant agreements, funding documents, and an integrated estate plan.

Question 48

How much does business succession planning cost in Texas?

Accepted Answer

Fees depend on the size and complexity of the business, the number of owners and successor candidates, the existing documents, the desired structure, and the coordination required with the client's tax and financial team. A first-pass plan for a single-owner Texas business — buy-sell, updated operating documents, coordinated estate plan, and funding — typically runs a mid-four-figure to low-five-figure engagement. Comprehensive multi-generational family-business planning is a longer-horizon engagement scoped after a discovery conference.

Question 49

When should a Texas business owner start succession planning?

Accepted Answer

Meaningful succession planning typically begins five to ten years before an intended transition. The elements a business should have in place immediately — regardless of transition timing — are a current buy-sell agreement, an updated operating agreement or bylaws, continuity documents for owner incapacity, and an integrated estate plan. Waiting until the owner is ready to exit generally forecloses the more favorable tax and structural options.

Question 50

What is a buy-sell agreement in Texas?

Accepted Answer

A buy-sell agreement is a contract among the owners of a business that governs what happens to an ownership interest on death, disability, retirement, divorce, deadlock, involuntary transfer, or an outside offer. In Texas it can be structured as a cross-purchase (owners buy each other out), a redemption (the entity buys back), or a hybrid — with life-insurance, disability-policy, sinking-fund, seller-note, or bank-financed funding. Any Texas business with more than one owner should have one.

Question 51

How do I value my Texas business for a buy-sell agreement?

Accepted Answer

Common approaches are (1) a fixed formula (multiple of EBITDA, revenue, or book value) reviewed on a set cadence, (2) an appraisal process (agreed appraiser or dueling-appraiser mechanism), or (3) an annual owner-set value. Each has trade-offs: formulas are predictable but drift from market reality; appraisals are current but expensive and contentious; owner-set values are cheap but rarely refreshed. The right choice depends on the business, the ownership structure, and the funding source.

Question 52

How do I transfer a Texas family business to my children?

Accepted Answer

Common structures include (i) outright gift with an annual-exclusion or lifetime-exemption filing, (ii) sale for a promissory note at arm's-length terms, (iii) installment sale to an intentionally defective grantor trust (IDGT), (iv) grantor retained annuity trust (GRAT), or (v) recapitalization into voting and non-voting interests followed by gifts of non-voting interests. The right structure depends on the owner's estate-tax profile, the child's role in the business, the presence of non-participating children, and coordination with the owner's overall estate plan.

Question 53

What is a management buyout of a Texas business?

Accepted Answer

A management buyout is a sale of the business — usually the assets — to the existing leadership team, often with substantial seller financing. Structuring issues include (i) valuation and price mechanics that reflect the management team's role in creating the value, (ii) the funding stack (senior bank debt, seller note, roll-over equity, SBA where applicable), (iii) restrictive covenants and retention terms, (iv) preservation of key customer, supplier, and employee relationships through and after transition, and (v) coordination with the owner's estate plan and post-closing role.

Question 54

What is the difference between succession planning and estate planning?

Accepted Answer

Estate planning determines what happens to a person's assets at incapacity or death. Succession planning determines what happens to the business — often during the owner's lifetime. A privately held business is usually the largest and most illiquid asset in the owner's estate, so the two disciplines must produce a single coordinated plan. When they conflict, the business transfer generally occurs on the terms of the transaction documents rather than the estate plan.

Question 55

What happens to my Texas business if I die without a succession plan?

Accepted Answer

The business passes under the owner's will, revocable trust, or Texas intestacy law — without regard to whether the recipient can run the business, whether the co-owners will accept the recipient, or whether the estate has liquidity to pay taxes and expenses. In many cases the result is a forced distress sale. A funded buy-sell agreement, continuity documents, and an integrated estate plan prevent this outcome.

Question 56

Can I sell my Texas business tax-free using a rollover or reorganization?

Accepted Answer

Tax-deferred (not tax-free) options include (i) a Section 1042 rollover into a qualified replacement security when selling to an ESOP that owns at least 30% post-transaction, (ii) a Section 351 or 368 reorganization if the transaction is structured as an equity exchange with an acquirer of qualifying character, (iii) an installment-sale approach under Section 453 that spreads gain recognition over the note payment period, and (iv) a charitable remainder trust for owners with philanthropic intent. Each has specific eligibility rules and is coordinated with the client's CPA.

Question 57

How does an ESOP work for a Texas business owner?

Accepted Answer

An Employee Stock Ownership Plan is a qualified retirement plan that holds employer stock for the benefit of employees. In a leveraged ESOP transaction, the ESOP borrows money to buy the owner's shares — providing liquidity to the seller, potential Section 1042 tax deferral, and continued participation for employees. ESOPs are complex, expensive to establish, and best-suited for businesses with roughly $10 million+ in EBITDA, a stable customer base, and a management team prepared to operate independently of the founder. Lone Star Counsel evaluates ESOPs against alternatives at the succession-strategy stage.

Question 58

What is a family limited partnership and when is it used in Texas succession planning?

Accepted Answer

A Texas family limited partnership (FLP) — or its LLC equivalent — is a common structure for consolidating family investment assets or a family business under a general-partner entity controlled by the senior generation, with limited-partner interests held or gifted to the next generation. The structure permits centralized management, coordinated investment policy, restrictions on transfer, and potential valuation discounts on transferred limited-partner interests for gift- and estate-tax purposes. Attention to the operating substance of the entity is essential; the IRS has successfully challenged FLPs formed at or near death or lacking business purpose.

Question 59

How long does business succession planning take?

Accepted Answer

A first-pass succession plan — buy-sell agreement, updated operating documents, coordinated estate plan, and funding — typically takes 90 to 180 days from initial discovery conference. A comprehensive multi-generational family-business plan involving trusts, entity restructuring, and gifting is a two-to-five-year engagement with an ongoing annual review cadence. Lone Star Counsel scopes and prices each engagement after an initial discovery conference.

Question 60

Do I need life insurance to fund my buy-sell agreement?

Accepted Answer

Usually, yes. Life insurance is the most cost-effective way to provide the cash that will be required to buy out a deceased owner's interest at the moment of death — often exactly when the business can least afford the outflow. Policies are structured to match the buy-sell mechanic: cross-purchase buy-sells use policies owned by each owner on the others' lives; redemption buy-sells use policies owned by the entity. Disability, key-person, and split-dollar arrangements often accompany the life-insurance funding.

Question 61

What is a phantom equity or profits-interest plan for key employees?

Accepted Answer

Phantom equity is a contractual right to receive cash based on the appreciation in the company's value — without transferring real equity. A profits interest (available in LLCs and partnerships) grants an actual equity interest in future appreciation without triggering current tax at grant. Both are used to reward and retain key employees through and after a succession event without diluting family ownership or triggering S-corp eligibility issues.

Question 62

How do I keep a Texas real-estate holding out of the sale of my operating business?

Accepted Answer

Where the operating business owns real property, standard practice is to spin the real estate into a separate Texas LLC before a sale, lease it back to the operating business under a market-rate triple-net lease, and retain the LLC after the operating business is sold. The buyer takes an operating tenant under a lease; the seller retains an income-producing real-estate asset. Structuring the separation typically requires attention to state and federal income tax, transfer taxes, existing financing, and title insurance.

Question 63

Can I combine succession planning with charitable giving?

Accepted Answer

Yes. Common structures include (i) a charitable remainder trust (CRT) that receives closely held stock, sells it, pays the owner a lifetime income stream, and passes the remainder to charity; (ii) a charitable lead trust that pays a charitable annuity for a term and passes the remainder to family; (iii) direct gift of appreciated stock to a donor-advised fund; and (iv) a private-foundation structure for families with sustained philanthropic intent. Each is coordinated with the succession transaction and the client's overall estate plan.

Question 64

Do I need to register my trademark, or is common-law protection enough?

Accepted Answer

Using a mark in commerce creates common-law rights, but only within the geographic area where you actually use it — and only for as long as you can prove that use. Federal registration with the U.S. Patent and Trademark Office gives you nationwide priority, constructive notice to later adopters, the right to use the ® symbol, presumption of validity in litigation, access to federal court, the ability to record with U.S. Customs to stop counterfeit imports, and — after five years — potential incontestability. For any Texas business or brand with growth ambitions beyond a single city, federal registration is worth the investment.

Direct answers,in plain Texan.

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