Stephenson Fournier

Understanding joint ventures: How can you minimize the impact of taxes on your businesses?

2026-07-01T11:07:20Z

Taxes are often one of the biggest factors shaping decisions about joint ventures. While the business deal may drive the “why” of the collaboration, tax planning often determines the “how.” This includes whether to form a new entity, what type of entity to use, how to fund the venture and how profits and losses will flow to the owners. With careful planning up front, parties can reduce tax friction, avoid surprises and lay the foundation for the venture's future success.

Match the structure to your tax goals

Separate entity structures can help with operational clarity and liability protection, but do require you to pay taxes for the venture as a new business. LLCs frequently offer more flexibility in allocating profits, losses and distributions in ways that match the parties’ deal terms. Corporations may be attractive in certain growth or reinvestment strategies, but can raise issues around dividend taxation and tax consequences on exit depending on the broader structure. Contractual JVs may, in some situations, avoid creating an additional entity, which can help you avoid certain taxes. However, they require careful drafting to allocate income, expenses and ownership of assets in a tax-efficient way.

Plan funding carefully

How you fund your joint venture can significantly change the tax outcome. Equity contributions (cash, property, IP, services) can create tax issues if assets are contributed at a gain, if liabilities are involved, or if ownership percentages don’t reflect value. Debt funding may allow for interest deductions, but can also increase complexity.

Plan for the end of the venture from the beginning

Tax-efficient JVs are structured not only for operations, but also for how the parties may unwind the relationship. The “exit” could involve one party buying out the other, selling the joint venture to a third party, distributing assets back to the owners or shutting down after a specific project. These paths can have very different tax outcomes. Modeling them early helps the parties avoid locking themselves into a structure that is efficient today but expensive to exit later.

The right approach can reduce the impact of taxes on your joint venture

Minimizing tax impact in a joint venture starts with early planning. Careful tax planning can reduce unnecessary tax burden and build the groundwork for the venture’s financial success.

Expanding your business to another state: 4 questions to consider

2026-07-01T11:06:24Z

Expanding into a new state — whether by opening a new location, hiring remote employees, buying an existing company or completing an acquisition merger — can be a major growth opportunity. It can also expose your business to new legal obligations, taxes, licensing rules and operational risks that vary widely from state to state. What issues should businesses evaluate before taking their company to a new location?

Do you have the right expansion structure?

How you expand affects your legal exposure, taxes and compliance workload. Common structures include:

Registering as a “foreign” entity in the new state (keeping your current entity and qualifying to do business there)
Forming a new subsidiary or separate entity in the new state
Asset purchase of a local business (buying assets rather than the whole entity)
Stock purchase/merger (acquiring the entity itself)

Not only can your choice determine how you operate in a new state, it can also determine your level of risk in that expansion. In mergers and acquisitions, the structure can determine whether you inherit past liabilities such as unpaid taxes, wage claims or contract disputes.

Are you prepared for local taxes?

Expanding operations often adds your complex new tax challenges. These could include state income or franchise taxes, sales tax collection obligations, gross receipts taxes and local taxes for the city or county. Even without a physical location, the state may require sales tax collection based on sales volume or transaction counts.

What are the requirements of doing business in the state?

States may impose a variety of requirements on entities doing business there. This can include annual reports and filing fees, and registered agent requirements. Even if you have experience meeting these requirements, you may have different reporting deadlines in your new state. You will likely also need to navigate new requirements for your daily operations. You may need general business operating licenses, professional licenses or health and safety permits. You may also need to comply with different financial services, transportation, childcare or zoning laws. State privacy laws may require additional steps to remain compliant, especially if you handle customer data.

Do you need to update employment practices?

Hiring even one employee in another state can trigger new obligations. You will need to navigate local wage and hour rules, pay laws, benefits, workers’ compensation coverage and employee classification rules. If you’re acquiring a company, you should also review past wage practices and benefit plans carefully because employment claims could follow the business. An attorney can help you ensure that your expanding business aligns with all relevant local laws.

Legal guidance can help you expand your company with confidence

Expanding into another state can be transformative, but it should be treated as both a business move and a legal compliance project. The best results typically come from early planning and working with a business law attorney who can help you create a comprehensive legal strategy for your changing business.

Understanding joint ventures: Who takes on the tasks in your business?

2026-07-01T11:01:48Z

Joint ventures often look straightforward on paper: two (or more) parties form a new business to pursue a shared opportunity. In practice, many JVs succeed or fail based on a more basic question—who is actually doing the work. Manufacturing, R&D, distribution, customer support, back-office administration, and compliance frequently sit with one of the owners rather than the JV itself. That can be efficient, but it also can introduce additional risk if you have not aligned your expectations, pricing and incentives.

Services provided by the JV parties: alignment matters as much as price

A JV that relies on owner-provided services should treat those services as core deal terms, not an afterthought. The goal is more than getting a “fair” price. Ultimately, you have to ensure that each party’s incentives support the same business plan. Misalignment can show up quickly. One partner may want to build enterprise value for a future sale, while the other may be more focused on steady service revenue over time. Below are two common ways to structure these contributions.

Option 1: Contribution-in-kind

One approach is to treat services as part of a party’s capital contribution. This can work well when a partner’s know-how, facilities or operational platform is a key reason the JV exists. Key issues to address include:

Valuation: If services count as capital, the parties need a method to value them. They also need to confirm what is included and what is not.
Performance standards: Define scope, timelines, quality metrics, reporting and who controls day-to-day priorities.
Remedies for non-performance: If the services don’t show up as promised, the agreement should specify what happens. This may include replacement services, make-up contributions, dilution, damages, termination or other negotiated remedies.

The challenge is that “services as capital” can be harder to administer than cash, especially if performance is ongoing or difficult to measure.

Option 2: Create an ongoing service contract

Another common structure is for the JV to contract with one (or both) owners under a services agreement. Operationally, this can be simpler: the JV pays invoices and receives defined services, and the arrangement can be adjusted over time like a typical vendor relationship. However, service contracts can create incentive problems if they become a primary economic benefit for one owner. For example, if a partner earns significant fees from supplying the JV, they may prefer long-term service revenue over strategies that maximize the JV’s exit value. As a result, the JV may become dependent on a partner’s platform, making it harder to replace that partner or renegotiate terms later.

How can you ensure that your venture benefits both parties?

To keep the relationship healthy, service contracts often benefit from clear SLAs, pricing terms, audit rights, termination rights, and transition assistance if the JV needs to change providers. When an owner provides services to the JV, the transaction is often a related-party transaction. Even if the parties trust each other, governance protections help prevent disputes and protect minority stakeholders. Common guardrails include:

Approval by disinterested decision-makers (for example, independent board members or non-conflicted managers)
Disclosure requirements (pricing, margins, key assumptions)
Benchmarking or “market” checks to support fairness
Ongoing oversight through reporting and renewal approvals

These steps are not just about compliance. They can reduce resentment and keep the JV focused on performance rather than accusations of self-dealing.

Build a plan today that protects your venture’s operations and success

Joint ventures run on execution. If one or both owners will provide essential services, the JV documents should spell out how you will value, deliver and oversee those services. Everyone involved in the venture can protect their interests by addressing these operational details early and seeking guidance about the legal impact of your business decisions.

Understanding joint ventures: Who makes choices as you move forward?

2026-07-01T11:01:45Z

A joint venture only works if the parties can make decisions and operate efficiently and if each party agrees with how they share or limit control. That means governance is not just a formality; it is the operating system of the venture. As the parties move from signing a term sheet to running an actual business should answer a practical question: who gets to make decisions, and what happens when they disagree?

Begin with clearly defined roles

The entity form of a joint venture can support effective decision-making by creating a defined governance structure with clear roles, authority and accountability. A joint venture structured as a separate entity typically operates through an appointed board or management committee and designated officers who have express power to act on the venture’s behalf. This structure helps ensure decisions are made through established channels, with documented procedures for meetings, voting, and recordkeeping that reduce ambiguity and delay. In a purely contractual joint venture, the parties collaborate under an agreement without forming a separate entity. This can blur who is “in charge” because there may be no formal board, officers or centralized management authority. Instead, there are just two businesses trying to operate a shared project while still acting through their own internal chains of command. However, businesses that choose this structure can strengthen decision-making by drafting a detailed governance section in the joint venture contract.

Plan for conflict before it arises

Even with well-defined roles, the hardest work often begins when real money, timelines and competing business interests are on the line. A strong joint venture agreement anticipates the most common pressure points – where decision-making can stall, incentives can diverge or one partner can feel exposed – and sets out clear rules for how those situations will be handled. Some details to address include:

Minority decision-making: Even where one party has “control” of decisions, minority investors often negotiate protective veto rights over specific high-impact decisions.
Deadlocks: If owners share control or have veto rights, impasses are inevitable. Agreements often include escalation processes, mediation, tie-breakers or exit mechanisms to prevent stalled decisions from stopping the business’s momentum.
Transfer restrictions: Because ownership changes can disrupt the venture’s strategic balance, agreements commonly restrict transfers and include rights of first refusal and limits on transfers to competitors. This can help both parties take a more active role in the future of their company.

In practice, the best joint venture terms are the ones the parties rarely need to “use” because they prevent uncertainty from turning into conflict. By outlining these details up front with the support of an experienced attorney, the venture is better positioned to operate efficiently and stay intact when challenges arise.

The governance decisions you make today can help you avoid future conflict

Effective joint ventures are not built on goodwill alone. Even aligned partners may clash because of different strategic priorities, different governance styles and ambiguous structures. The fix is rarely “better communication” alone. It is often creating a governance system that makes decisions predictable and disputes manageable. When decision rights are clear, escalation is structured and deadlocks have a defined path forward, partners can focus on growing the venture instead of fighting over it.

Diligence Rigor: Why Strategic Buyers and Sellers Treat It as a Deal Lever (Not a Checklist)

2026-07-01T10:39:25Z

In a Texas middle-market transaction, whether it’s a commercial real estate acquisition, a manufacturing platform investment, a software company sale, or a carve-out, diligence is one of the few phases that can change price, structure, and leverage in real time. It’s not a formality. It’s where small gaps in ownership, contracts, or records can shift negotiating power or stop a deal entirely.

For buyers, diligence is how you keep focus on strategy and value, rather than getting boxed into risk mitigation late in the process. For sellers, diligence readiness is how you protect valuation, reduce re-trades, and keep momentum toward closing.

Diligence is the core of smart dealmaking (on both sides)

The same diligence categories buyers use to underwrite risk are the categories sellers should treat as pre-close value protection.

1) Equity and cap table alignment (who owns what and whether the records prove it)

Buyers want to confirm the ownership structure is clean: stock or membership interests, governing documents, side letters, and the books and records the entity is expected to maintain. Misalignment here is more than an administrative issue—it can become a pricing issue, a closing condition, or a deal-structure change (escrows, holdbacks, special indemnities, or even a pause while the cap table is fixed).

Sellers benefit from treating this as a pre-sale project: if the cap table is tight and the paper trail is complete, you reduce the odds of last-minute leverage loss.

2) Intellectual property ownership (yes, even for non-tech deals)

IP diligence isn’t limited to software companies. Branding, proprietary processes, customer lists, product designs, and internal tools can be central value drivers across industries. Buyers look for clear title to IP and focus on whether founders, employees, and contractors properly assigned rights. From the seller side, missing assignments are a classic “surprise” issue that can trigger buyer demands for special protections or delays while documents are chased down.

3) Documented agreements

Informal agreements, oral promises, and unusual compensation arrangements can create real exposure, especially when terms are unclear or inconsistent with written documents. Buyers care because ambiguity increases dispute risk and can undermine the economics they think they’re buying. Sellers should assume that anything material but undocumented will be treated as a risk item. Risk items tend to become purchase price adjustments or post-closing liability allocations.

4) Key corporate and transactional documents

This bucket is broad by design: company records, board/owner consents, key contracts, leases, financing documents, and state filings. When these are current and consistent with how the business actually operates, diligence moves faster and the deal team can focus on value and structure rather than cleanup. For sellers, organized records reduce friction and help avoid the “death by a thousand follow-ups” that slows deals and invites renegotiation.

How diligence shapes strategy

Well-run diligence doesn’t just identify problems, it informs deal architecture. When governance records are clear and contracts are organized, buyers gain confidence and move quickly. For sellers, diligence readiness signals competence and reliability. That credibility can translate into better terms, fewer closing conditions, and less pressure for aggressive indemnities or holdbacks.

Protecting deal value starts before diligence begins

Diligence is more than a checklist; it’s a tool to protect valuation and control. Buyers use it to confirm what they’re buying and to decide where to push for structure or price. Sellers use it to keep leverage, reduce surprises, and preserve deal momentum. In high-value transactions, diligence rigor is often the difference between a smooth closing and a deal that drifts, retrades, or breaks.

Understanding joint ventures: What is the right structure for you?

2026-07-01T10:30:10Z

When parties come together to pursue a shared business objective, whether launching a new product, developing technology, or entering a new market, the first major decision is how to structure the joint venture.

Forming a separate entity

Liability protection is often the starting point for companies that form a separate entity. Either a limited liability company (LLC) or corporation structure generally provide a liability shield, meaning owners are typically not personally responsible for the entity’s obligations solely by virtue of ownership. Because liability protection is available either way, the real differentiators tend to be:

Tax efficiency
How the parties want decision-making authority and oversight to work

A corporate structure generally comes with a built-in governance framework and can be attractive where the parties want a familiar, standardized management model. An LLC is the more flexible option, allowing you to tailor management and control through the operating agreement and allowing the venture to function more like a partnership. Liability protection is only one of the benefits of forming a separate entity. The business you want to pursue can also be an important consideration. Some business goals like pursuing government contracts may require your venture to follow a specific structure. Capital raising plans, long-term ventures with employees, contracts and ongoing operations may also benefit from a dedicated LLC or corporation.

Using contractual agreements

Not every joint venture requires a new entity. In some cases, especially where the goal is limited in scope and duration, a using a contract can be more efficient. For example, if two parties are collaborating to develop a specific technology intended solely for their own use, they may prefer a contract-only joint venture. This approach can reduce administrative complexity and focus the arrangement on clearly defined rights and obligations. A thorough and clear contract is the foundation to success if your company chooses this approach, addressing development responsibilities, ownership of resulting intellectual property, confidentiality and permitted use.

The right choice depends on your goals

The way you structure your business venture should ultimately be defined by what you want to achieve with that venture. Where flexibility and tailored control arrangements are priorities, an LLC is often attractive. Where a standardized oversight model is preferred, a corporation may fit better. Where your collaboration is self-contained, a contract-only joint venture may be the simplest path. Carefully considering these options with the help of an experienced attorney and financial professionals can help you make informed decisions as you begin your venture.

3 legal safeguards for industrial landlords facing power delays

2026-07-01T10:23:59Z

In the Houston Triangle, "speed to power" is now as critical as location. As an established developer or a high-net-worth investor, you likely feel the pressure. You have the capital for $100 million projects, but waiting for a grid connection can now take several years. It is frustrating to see a major project stalled by utility bottlenecks you cannot control. In early 2026, the volume of power requests remains at record highs. Electric Reliability Council of Texas (ERCOT) reports that the "large load" queue grew by nearly 300% recently, reaching over 233 GW (gigawatts). To protect your capital from these delays, consider these three legal safeguards.

1. Connect your timelines to the power company’s progress

Instead of picking a random calendar date for the lease to start, use the power company’s actual progress as your timer. You can set the lease to begin only after the utility provider finishes a specific task. This could be completing a local substation or officially approving your connection. By tying the rent start date to when the power actually turns on, you protect your cash flow from a waiting game that is out of your hands. However, simply delaying the rent start is not a total shield. You must ensure the lease does not have a "drop-dead date" that makes you liable if the power is not ready by a fixed deadline.

2. Update your "unforeseeable events" list

Your contract language is the final word. Under Texas law, "force majeure" (unforeseeable events) clauses are read very strictly. If your lease does not specifically mention utility delays, a general "acts of God" clause might not protect you from grid backlogs. You should specifically name "power grid backlogs" or "utility construction delays" as valid reasons to pause a project. This prevents a tenant from claiming you broke your promise if the regional grid causes a holdup. Properly defining these events keeps your project timeline safe even when infrastructure is stalled.

3. Use clear and conspicuous as-is disclaimers

Under Texas common law, there is a general expectation that a commercial building is fit for its intended use. While this usually refers to the physical building, a frustrated tenant might try to blame you if the local grid cannot handle their machinery. To keep your interests safe:

Mention power capacity specifically in "as-is" agreements.
State that you do not guarantee the grid's total power volume.
Confirm in writing that the tenant has performed their own research on utility capacity.

By including these notes, you clarify that while you provide the building, the regional power supply is a separate matter.

Seek legal guidance for your industrial assets

Ensuring your industrial site is prepared for 2026 demands is vital for maintaining property value. Address these risks through focused contract negotiation and you can prevent a high-value lease from becoming a costly liability. Consider speaking with an attorney to review your upcoming lease agreements. Taking this proactive step can protect your delivery timelines against grid volatility.

Balancing risk and return in development deal structures

2026-07-01T10:14:01Z

Real estate development offers big opportunities but every deal comes with risk. Funding talks and contract choices can shift liabilities or create disputes that cut into profits. Here's why structuring your deal with both risk and compliance in mind is the best way to protect your investment.

Understanding risk allocation

Developers, lenders, equity partners and local government often work together on projects. Each one may provide money or resources and may take on part of the risk. Problems start when contracts fail to explain who handles delays, cost overruns or zoning issues. Poor risk allocation can stop projects or result in lawsuits that waste time and money. You can limit these problems by drafting agreements that spell out roles, responsibilities and remedies. Bringing in a lawyer early keeps expectations clear and helps prevent conflicts later.

Structuring returns

Financial returns on real estate development projects can take many forms. They may be fixed interest payments, profit-sharing waterfalls or payouts based on milestones. The right setup depends on market conditions, project type and size and investor goals. According to research from the Texas Real Estate Center, higher expected returns are generally aligned with higher investment risk and careful deal structuring can protect profits. In competitive markets like Houston, developers may offer higher returns to secure funding, which increases risk exposure. By documenting payout terms, you can prevent disputes. Having strong contracts also helps because they tie promised returns to clear metrics, give everyone confidence and help avoid conflicts that could derail a project.

Why legal guidance matters

Balancing risk and return goes beyond finances. Laws, local rules and contract enforcement all influence how a project performs. To keep everything on track, consider consulting an experienced attorney. They help design agreements that protect your interests, make payout structures clear and reduce the chance of disputes. Strong legal planning can turn a risky deal into a well-managed investment with better long-term results.

Is a term sheet the key to smart preferred stock deals in Texas?

2026-07-01T10:04:58Z

If you are building a business and looking for outside investment, you will likely hear about term sheets and preferred stock or preferred equity. These documents can feel confusing, but they are the roadmap for your funding. Understanding these basics helps founders stay in control during negotiations.

What is a term sheet and why does it matter?

A term sheet is a short document that outlines the main business points of an investment opportunity or transaction. Founders use it, often with the help of counsel, before lawyers write the long, final contracts. You should know that a term sheet can be a mixed document. Often some parts, such as the company's proposed enterprise value, do not legally bind either party and can change. However, if the term sheet is signed by the parties, some parts can be legally binding on both sides. These usually include exclusivity (you cannot talk to other investors for a while) and confidentiality (disclosed information, including the existence of the negotiations, must be kept secret). A terms sheet helps align the parties on big issues early. This can save time and money on legal fees later.

What you will see in a term sheet

Term sheets for a preferred investment focus on how much control the founders keep and how investors get paid. Founders should pay close attention to these categories to ensure they align with long-term goals. These include:

Investment amount and timing: The total cash the investor gives the company.
Valuation: What the company is worth before new money comes in.
Preferential Return or Dividends: This is an amount paid to the preferred owners first, before common or other equity owners are paid.
Liquidation preference: This is an amount paid to the preferred owners on sale or shut down of the company.
Voting rights: This explains the extent of investors' say in business decisions.
Other rights: Rights of first refusal, board seats, information rights, protection against dilution, registration rights, pre-emptive rights, and other rights are often negotiated.

These six pillars represent the core of the financial relationship between you and your new partners. It is helpful to involve counsel early on to help identify issues and protect founders. Once both sides settle these points, the legal teams will draft and negotiate final agreements.

Why the law matters

Both federal and state laws regulate the issuance of equity to investors. The laws are similar, but not identical, from state to state. In Texas for example, businesses must follow the Texas Business Organizations Code. This law sets the rules for how a business issues different classes or series of equity. Often, filings are required with the states where the company is formed and where investors reside. Speaking with a lawyer early may ensure your binding clauses do not trap you. They may help you understand the technical language so you can grow your business with confidence.

Stephenson Fournier Recognized in Chambers USA Texas Spotlight Guide 2026

2026-06-22T21:04:07Z

Stephenson Fournier has been ranked in Chambers USA Texas Spotlight Guide 2026 and recognized as a leading small to medium-sized law firm offering a credible alternative to Big Law. Stephenson Fournier was selected based on an independent and in-depth market analysis, coupled with an assessment of our experience, expertise and calibre of talent. Chambers Spotlight Texas 2026 highlights 251 ranked firms across 17 regions and 33 distinct practice areas, marking a year-on-year increase of 68 firms and 12 practice areas. Now featuring 93 ranking tables, this expanded edition delves into the rich seam of talent on offer in the state, building on our existing list of the top small firms in Texas that can effectively and efficiently meet in-house counsel needs. Covering practice areas from Litigation and Mergers & Acquisitions to Trusts & Estates and Antitrust, the 2026 Guide highlights the standout firms in key practice areas. STEPHENSON FOURNIER stood out for its exceptional work and is recognized for our Corporate and Commercial law practice. Juli Fournier, Managing Partner, expressed the firm's gratitude: “STEPHENSON FOURNIER is honoured to be recognized by Chambers and Partners in their Spotlight Ranking for Texas. This acknowledgment reflects our commitment to providing top-tier legal services tailored to the unique needs of our clients and the complex matters that we help them navigate.” This recognition underscores STEPHENSON FOURNIER’s position as a key player in Texas’ legal landscape, offering clients throughout the state access to high-quality legal representation that combines big-city expertise with local specialized support. “Stephenson Fournier is delighted to be recognized by Chambers and Partners in their Ranking. This recognition is down to the quality of work that we provide our clients and the complex matters that we help them navigate.” About the Firm Stephenson Fournier is dedicated to delivering exceptional legal services that are both responsive and of the highest caliber, all while remaining attuned to the unique business needs and budget of each client. They take pride in offering not only outstanding legal representation but also practical business insight and sound judgment. Whether you require a Houston business transaction attorney, assistance with commercial real estate law, or support with estate planning or probate matters, their experienced team is here to help. Their success is rooted in helping clients achieve their goals. Their attorneys expertly manage, negotiate, and document complex business and real estate transactions, including mergers, acquisitions, financings, and other major commercial deals. They also offer estate planning and probate services tailored for business owners and high-net-worth individuals. For those seeking the expertise of a large firm with the personalized attention of a small one, this is the right place.