Texas business law: a lifecycle map from formation to exit.

Texas business law is the body of statutory and common law that governs the formation, operation, transactions, and dissolution of business entities in Texas. The principal sources include the Texas Business Organizations Code, the Texas Business and Commerce Code, the Texas Tax Code, the Texas Labor Code, the Texas Property Code, the Texas Civil Practice and Remedies Code, and the Texas Estates Code. Texas business law also includes the body of Texas case law interpreting those statutes, federal law that applies to Texas businesses, and a layer of regulatory rules promulgated by Texas state agencies. For any specific business, the applicable framework is the intersection of all these sources, scaled to the activities and transactions the business actually undertakes.

The Texas Business Organizations Code (TBOC) is the unified statute governing the formation, operation, and dissolution of business entities in Texas. Enacted in 2003, it replaced the prior framework of separate statutes for different entity types. Title 1 contains general provisions; Title 2 governs domestic corporations; Title 3 governs LLCs; Title 4 covers partnerships; Title 7 governs nonprofit corporations. Within each title, the chapters address formation, governance, fundamental business transactions, winding up, and other entity-specific matters. The TBOC is the foundational reference for any question about Texas entity law — the statutory baseline against which the specific terms of an operating agreement, shareholder agreement, or partnership agreement are read. Many questions founders treat as matters for negotiation are in fact answered by the TBOC unless the governing documents alter the default rule.

The answer depends on tax treatment, governance preferences, and exit path. Texas LLCs (TBOC Chapter 101) combine limited liability with pass-through tax treatment under the federal default. They allow customized governance through an operating agreement and minimal formality requirements. Texas corporations (Chapter 21) have more rigid governance and default to C-corporation tax treatment with potential double taxation, though an S-corporation election can shift to pass-through treatment subject to eligibility requirements. LLCs typically suit closely held businesses, professional services firms, real estate ventures, and family-owned operations. Corporations typically suit businesses planning institutional capital raises (venture capital generally requires Delaware C-corp structure, not Texas), businesses with complex equity compensation needs, and businesses with multiple classes of investors. Many Texas businesses begin as LLCs and convert to corporations when institutional capital becomes appropriate, using the conversion mechanism in TBOC Chapter 10.

The Texas franchise tax — often called the margin tax — is the privilege tax imposed on most entities formed or doing business in Texas, governed by Chapter 171 of the Texas Tax Code. Texas does not have a state corporate income tax or a state personal income tax; the franchise tax is the principal state-level entity tax. The tax is imposed on the entity's taxable margin, calculated as the lower of: total revenue minus cost of goods sold; total revenue minus compensation; total revenue times 70 percent; or total revenue minus $1 million. Different rates apply to different industry sectors. Texas provides a no-tax-due threshold below which entities owe no franchise tax, but annual reports are still required even when no tax is owed. Failure to file results in forfeiture of the entity's right to do business in Texas, which has consequences far beyond the immediate tax issue.

Three thresholds matter in practice. Formation: every Texas business benefits from counsel involvement at formation to address entity selection, governance documents, founder relationships, and IP assignments. Recurring complexity: when legal questions arrive across multiple areas regularly, the per-matter outside counsel approach starts to break down. Transactions: anytime the business is preparing for a major transactional event — capital raise, acquisition, major contract, key hire — counsel involvement before the transaction begins produces materially better outcomes than counsel cleanup after. The general principle: corporate counsel is most valuable when engaged before the structural decisions are made, not after. Counsel that arrives during diligence is solving problems that would not have existed if the prior decisions had been informed.

The Texas Data Privacy and Security Act became effective July 1, 2024, and is Texas's comprehensive consumer data privacy law. It applies to persons that conduct business in Texas or produce products or services consumed by Texas residents and either process or sell personal data, or process or sell personal data of more than a specified number of Texas consumers. The TDPSA grants Texas consumers rights including the right to know, access, delete, and port personal data, and to opt out of certain processing activities. Businesses subject to the TDPSA must provide reasonable privacy notices, conduct data protection assessments for high-risk processing, implement reasonable security practices, honor consumer rights requests within statutory timeframes, and apply specific protections for sensitive data categories. Enforcement is by the Texas Attorney General. The law represents a meaningful expansion of Texas business law into the data and privacy space.

Delaware is the dominant state of formation for U.S. businesses raising institutional capital because of its specialized Court of Chancery, deep body of corporate case law, and statutory framework that favors managerial flexibility. Delaware corporate law is heavily judge-made through Chancery Court decisions; Texas business law is more statute-driven with less judicial elaboration on certain corporate governance questions. Delaware does not impose a state corporate income tax on corporations not operating in Delaware; Texas does not impose state corporate income tax at all. The practical implication: a Texas LLC is typically the right vehicle for closely held operations; a Delaware C-corporation is typically the right vehicle for businesses raising institutional capital; and a Texas business that grows into institutional capital will often convert to a Delaware C-corporation as part of the financing process. The conversion is a defined corporate transaction with tax and legal consequences that should be planned, not rushed.

A Texas business attorney is any attorney whose practice covers the legal needs of Texas businesses — typically a general practitioner who handles entity formation, contracts, basic litigation, and general business matters for small to mid-market businesses. A corporate general counsel is a senior attorney who serves as a company's lead lawyer with responsibility for the legal function as a whole — owning the legal infrastructure, integrating across all legal areas, coordinating specialist outside counsel, and providing strategic legal counsel inside the leadership team. Most growing Texas businesses pass through a stage where the per-matter attorney relationship has become insufficient but a full-time GC is not yet justified. The fractional general counsel model fits that stage. The choice between a Texas business attorney and a fractional GC is often a function of complexity, transactional activity, and the degree to which the business needs legal counsel integrated into leadership decision-making rather than engaged matter-by-matter.