Shareholder and Buy-Sell Agreements

Texas law lets shareholders agree to arrangements the corporate statute would not otherwise allow, such as eliminating the board, naming the officers or requiring the company to wind up at an owner's request. The agreement must be signed by all shareholders and made known to the corporation, or placed in the certificate of formation or bylaws with every shareholder's approval. It must be noted on the share certificates, and it ends if the shares are listed on a national securities exchange or regularly traded over the counter.

Texas also enforces reasonable transfer restrictions, including rights of first refusal and mandatory buyouts, against later buyers if the restriction is noted conspicuously on the certificate. A new restriction doesn't bind shares already issued unless the holder voted for it or signed the agreement, so these terms are easier to add early.

For LLCs, the Texas default is that someone who receives a membership interest gets its distributions but becomes a member only if all members approve. A company agreement can change that default.

Whether the company or the owners hold any life insurance has tax consequences we review with the owners' CPA. Other buyouts are usually paid in cash or through an installment note secured by the purchased shares. When a buyout happens, our partner buyouts page explains how it is documented.