If you are buying or selling a small business in Texas, the letter of intent, often called an LOI, is typically the first document that sets out the terms of the deal. It arrives before the purchase agreement, before due diligence is complete, and often before either party has retained legal counsel.
That timing is exactly why it deserves careful attention.
A letter of intent in a small business acquisition typically addresses the proposed purchase price, the deal structure (asset purchase or stock purchase), the exclusivity period during which the seller agrees not to negotiate with other buyers, key conditions to closing such as financing or due diligence, a projected timeline, and any material terms the parties have already agreed to. Some LOIs also include an allocation of the purchase price across asset categories, which has direct tax implications for both sides.
This is where many buyers and sellers are caught off guard. An LOI is generally described as non-binding, meaning the parties are not yet committed to closing the deal. But most LOIs contain provisions that are binding and enforceable: the exclusivity period, confidentiality obligations, and sometimes a break-up fee if the buyer walks away without cause. Signing an LOI without reviewing these provisions carefully can limit your options and create real legal exposure.
The terms you agree to in the LOI tend to set the baseline for the purchase agreement. If you accept a price, a structure, or an exclusivity period without fully understanding their implications, backing away from those terms later becomes difficult. Buyers may rely on the LOI as an expression of mutual intent and resist reopening terms that were already agreed. This is especially true in deals where both sides have already invested time and money in due diligence.
A well-drafted LOI protects the seller’s flexibility while the deal is still in progress. It should define clearly what the exclusivity period covers and when it expires, limit representations the seller is making at this stage, and preserve the seller’s ability to walk away if due diligence reveals that the buyer is not proceeding in good faith or cannot secure financing.
For a buyer, a strong LOI secures adequate time to complete due diligence without the risk that the seller is simultaneously negotiating with competing buyers. It also establishes the key economic terms early, reducing the likelihood of price renegotiation later. The LOI is the buyer’s opportunity to signal seriousness while preserving flexibility on terms that cannot be finalized until due diligence is complete.
In business acquisitions in the $3 million to $10 million range, the LOI stage often moves quickly because both parties are eager to move forward. Taking the time to have an attorney review the LOI before signing costs far less than unwinding a deal that went sideways because the terms were not properly understood at the outset.
Filippov Law Group, PLLC advises buyers and sellers in business acquisitions throughout Texas and Utah, including LOI review and negotiation, due diligence, and purchase agreement drafting. Contact our Houston office at (832) 305-5529 or visit filippovlaw.com/contact to schedule a consultation.
Selling a business you have spent years building is different from any other financial transaction. The legal steps you take before going to market, during negotiation, and at closing determine not just what you receive, but whether the deal holds together after it closes.
Here is what Texas small business owners need to know before putting their company on the market.
Before engaging a broker or approaching buyers, conduct an internal legal review of your business. Confirm that all entity filings are current with the Texas Secretary of State, that your operating agreement or shareholder agreement does not contain transfer restrictions that could block or complicate a sale, and that key contracts with customers, vendors, and landlords are assignable. Gaps discovered by a buyer during due diligence give them leverage to reduce the price or walk away. Discovering them yourself first gives you time to address them.
Sellers often focus on the headline purchase price without analyzing what they are actually transferring and what liabilities they are retaining. In an asset sale, you may retain the legal entity and any liabilities attached to it. In a stock sale, the buyer assumes the entity in full. Each structure has different tax consequences, and the right choice depends on your specific circumstances. This decision should be made with both legal and tax counsel before you begin negotiations.
The purchase agreement is where deals get made or broken. The representations and warranties you make in that agreement about the condition of the business can create post-closing liability if they turn out to be inaccurate. Indemnification provisions determine how disputes are resolved after closing. Non-compete clauses restrict what you can do next. Escrow or holdback arrangements can delay when you receive part of your proceeds. Every one of these provisions is negotiable, and the terms that appear in the first draft submitted by the buyer’s counsel are not the terms you have to accept.
If part of your purchase price is structured as an earnout, meaning you receive additional payments based on the business’s future performance after the buyer takes over, you need to understand exactly how that performance will be measured and what control the buyer has over the decisions that affect it. Earnouts are a common feature of small business deals and a common source of post-closing disputes.
Most buyers of small businesses require a transition period during which the seller remains involved to hand over operations, introduce key relationships, and support continuity. The length of that period, what you are required to do, and whether you are compensated for it are all negotiable points that belong in the purchase agreement, not in a side understanding reached at the closing table.
Selling a business is a process that rewards preparation. Owners who engage legal counsel early consistently close deals on better terms than those who wait until a buyer is already at the table.
Filippov Law Group, PLLC represents business sellers in Texas and Utah, from initial preparation through closing. If you are considering a sale or have received an offer, contact our Houston office at (832) 305-5529 or visit filippovlaw.com/contact to discuss your options.
One of the most common misconceptions buyers and sellers bring to a small business transaction is that it involves a handful of agreements, a handshake, and a wire transfer. In reality, acquiring or selling a business valued between $3 million and $10 million is one of the most legally complex transactions a private individual will ever undertake. The document count, the sequencing, and the number of decisions required before a definitive purchase agreement is even drafted routinely surprise first-time buyers and sellers alike.
Here is what the process actually looks like, and where it most commonly goes wrong.
The purchase agreement is the document that closes the deal. But in a typical small business acquisition, it is nowhere near the first document signed, and it cannot be properly drafted until a significant amount of work is done upstream.
Before the purchase agreement, there is usually at least one letter of intent. In more complex deals, there may be several. A buyer may submit an LOI, conduct preliminary due diligence, discover issues that change the valuation, and need to renegotiate terms before a revised LOI is issued. A seller fielding interest from multiple buyers may receive and evaluate competing LOIs at different price points and on different terms before selecting a counterparty and entering exclusivity. Each LOI requires review, negotiation, and in some cases redrafting before the parties can move forward.
In a recent matter handled by our firm, a business owner selling a professional services company went through two separate LOIs with two different prospective buyers before reaching terms that could support a definitive agreement. The first LOI fell apart during due diligence when financing contingencies could not be resolved. The second required significant renegotiation of price and structure before the parties were aligned. Neither buyer had anticipated that the process would involve that level of iteration, and neither had initially budgeted the time or legal costs accordingly.
A buyer is not just acquiring a business. In most cases, they are acquiring an entity or its assets, and that entity must be properly organized and in good standing before the transaction can close. This is an area that consistently creates delays and unexpected costs.
For a Texas LLC, the operating agreement must be reviewed to confirm there are no transfer restrictions, buy-sell provisions, or member consent requirements that could block or complicate the sale. If the operating agreement is outdated, missing, or does not address the sale of the business at all, it needs to be amended or replaced before closing. Member or manager resolutions authorizing the transaction must be properly adopted and documented. If the entity has multiple owners, all of them must consent to the sale in the manner required by the operating agreement and Texas law.
If the entity being acquired was recently formed specifically to facilitate the transaction, the formation documents, operating agreement, and initial resolutions all need to be drafted from scratch and properly executed before the deal can proceed.
At the small business level, due diligence is often informal on the seller’s side, which is precisely what makes it risky for the buyer. There is rarely a data room. Documents are assembled on request, sometimes incompletely. Financial statements may not be audited. Tax returns, contracts with key customers, employee agreements, and lease documents may surface gradually over weeks rather than in a single organized production.
What buyers are looking for goes beyond the financials. Unpaid taxes and undisclosed liabilities, contracts that cannot be assigned to a new owner without third-party consent, customer concentration risk where one or two clients represent the majority of revenue, key employees who are not bound by non-compete or non-solicitation agreements, and regulatory licenses that are tied to the individual seller rather than the entity are all issues that can materially affect the value of the deal or kill it entirely.
Due diligence findings frequently lead back to the LOI. If a buyer discovers during due diligence that the business carries liabilities not reflected in the original offer, the price and terms need to be renegotiated before the purchase agreement can be drafted. That renegotiation may produce a revised LOI, an amendment to the existing one, or simply a revised term sheet. Any of those outcomes adds time and cost to the process.
Most small business acquisitions in Texas are structured as asset purchases rather than stock purchases. In an asset purchase, the buyer acquires specific assets of the business (equipment, contracts, customer lists, intellectual property) rather than the legal entity itself. This generally gives the buyer more protection from the seller’s existing liabilities. In a stock purchase, the buyer acquires the entity and steps into its full legal and financial history. Understanding which structure is right for the deal affects everything from tax position to what warranties the seller must provide, and it is a decision that should be made with both legal and tax counsel before the LOI is signed, not after.
Unlike large corporate acquisitions, small business deals in Texas are frequently seller-financed, meaning the seller receives part of the purchase price over time rather than all at once at closing. This arrangement requires a promissory note, a security agreement, and often a personal guarantee from the buyer. Each of these is a separate legal instrument that must be negotiated and drafted. Buyers need to understand what happens if the business underperforms after closing, and sellers need to understand what recourse they have if the buyer defaults.
After closing, there are practical and legal steps that are often overlooked: notifying vendors and customers, transferring licenses and permits, updating contracts and accounts, completing required state filings, and satisfying any post-closing conditions in the purchase agreement. Deals in Texas may also require assignment of commercial leases, which requires landlord consent and can delay or complicate closing if not secured early.
By the time a small business acquisition closes, the document count typically includes one or more letters of intent, a due diligence checklist and response package, entity formation or amendment documents, member or manager resolutions, a purchase agreement, a bill of sale, assignment agreements for key contracts, a promissory note and security agreement if seller financing is involved, and various closing certificates and filings. That is before any ancillary documents specific to the business or the deal structure.
Buyers and sellers who walk into the process expecting two or three agreements consistently find themselves unprepared for the timeline, the cost, and the decisions required. Engaging experienced legal counsel before the first LOI is signed is not a luxury in a small business acquisition. It is the most reliable way to avoid surprises that derail deals or create liability after they close.
Filippov Law Group, PLLC advises buyers and sellers throughout Texas and Utah at every stage of the acquisition process, from reviewing and negotiating a first LOI through entity preparation, due diligence, purchase agreement drafting, and closing. Contact our Houston office at (832) 305-5529 or submit an inquiry at filippovlaw.com/contact to schedule a consultation.
Below are three provisions that may be worth a closer look the next time you review or draft a business agreement.
A dispute resolution clause spells out the process both parties will follow if a conflict arises. Without one, you could find yourself headed straight to a courtroom, which often means higher costs and longer timelines.
In Texas, arbitration is one of the most common forms of alternative dispute resolution. Per state law, a written agreement to arbitrate is valid as long as it covers a controversy that exists at the time of the agreement or arises afterward.
A termination clause outlines the conditions under which either party can end the contract to ensure there are no surprises down the road. In Texas, a party that ends a contract without following its terms could face a breach of contract claim, which may result in compensatory damages or other legal consequences.
A strong termination clause typically covers details such as how much notice one party must give before ending the agreement or what qualifies as grounds for early termination, such as a material breach.
Think of this provision as an exit strategy built into the agreement itself. It helps both sides understand their rights and responsibilities if the relationship needs to come to an end.
It might seem straightforward, but unclear payment language is one of the most common sources of contract disputes among Texas businesses. A payment terms clause goes beyond stating how much one party owes, it establishes when payments are due, how they should be remitted and what happens if a payment arrives late.
For example, you might agree that invoices are due within 30 days of receipt. But if the contract does not specify a late fee or outline the consequences of nonpayment, enforcing that timeline becomes much harder.
]]>Most online business sales in Texas use an asset sale. You transfer specific items such as domain names, customer lists, software licenses, and intellectual property. Each asset must appear clearly in the purchase agreement. Overlooking digital assets like social media accounts or third-party licenses often leads to disputes after closing.
You also need to check whether contracts with vendors, platforms, or payment processors allow transfer. Many agreements restrict transfers or require advance consent. Ignoring those limits can cut off key services or trigger breach claims.
Online businesses rely on trademarks, copyrights, and owned content. Before selling, you must confirm that the business owns these rights. Content created by contractors often requires written assignments. Missing documentation can lead to misrepresentation claims or price reductions.
Business law sets rules for how personal data is handled. When selling an online business, you must review whether customer information can transfer under existing privacy policies and terms of use. Some policies promise limited data sharing, which restricts transfer rights without proper disclosures.
If the business falls under the Texas Data Privacy and Security Act, extra rules may apply. Prior data breaches can also trigger disclosure obligations. Addressing these issues during the sale helps reduce post-sale data disputes.
The purchase agreement lists promises about revenue, legal compliance, and operations. The law enforces these statements strictly. Inaccuracies can lead to indemnification claims or price adjustments. Sellers often negotiate limits on liability to manage risk after the sale.
Selling an online business requires attention to contracts, data, and intellectual property. Clear documentation and upfront disclosures help keep the transaction on track and reduce post-sale disputes.
]]>Most commercial leases in Texas address renewal through an option clause or extension provision. This section usually explains when notice is due, how long the renewal lasts, and whether rent changes. Texas courts treat renewal options strictly, so missing a deadline or ignoring required notice methods can eliminate the right to renew.
Notice requirements matter because Texas enforces them as written in the lease. A clause may require written notice, delivery by a certain method, or action within a narrow time frame. If the lease does not include a renewal option, renewal only happens by mutual agreement rather than by assumption or informal discussion.
Renewal clauses often set how rent changes during the new term, such as a fixed increase, a formula, or a market-rate adjustment. Other lease terms may also shift, including maintenance duties, operating expenses, or permitted use. Reviewing the full lease helps you understand the total cost of renewing rather than focusing only on base rent.
If the lease expires without renewal and you remain in possession, a holdover situation may arise. Depending on the lease terms and the parties’ conduct, this arrangement can result in a month-to-month tenancy. Texas law provides rules for terminating certain month-to-month tenancies, but it does not create a right to renew a commercial lease.
A commercial lease renewal in Texas depends on clear lease language, timely notice, and agreement on updated terms. Courts rely on the written contract instead of informal expectations. When you understand how renewal works, you can plan your next steps with clarity and confidence.
]]>A licensing agreement grants permission to use software or a digital product without transferring ownership of the intellectual property. The agreement defines who may use the product, how the product may be used, and the conditions attached to that permission. These terms rely on contract law and federal copyright law to limit use while allowing controlled access.
Licenses commonly fall into exclusive or non-exclusive categories. An exclusive license gives one party defined rights to use the software, and the owner agrees not to grant the same rights to others during the license term. A non-exclusive license allows multiple users to hold similar rights at the same time, which is typical for commercial software distributed to many customers.
Most software licenses address scope, duration, and permitted uses. Scope explains how the software may be used, such as internal business operations or commercial distribution. Duration establishes how long the license lasts, while additional terms often cover payment, confidentiality, and the right to terminate if the agreement terms are not followed.
Licensing agreements help protect intellectual property while allowing creators to generate revenue without giving up ownership. They also provide clarity for users by defining acceptable use and limitations. Clear licensing terms reduce disputes and support predictable business relationships tied to software and digital products. They also help businesses plan growth, partnerships, and product updates with fewer legal surprises.
]]>A takeover becomes hostile when a buyer seeks control without approval from the company’s board of directors. Instead of negotiating with leadership, the buyer goes directly to shareholders through a tender offer or attempts to replace directors through a proxy contest. The approach centers on shareholder choice rather than board consent.
A tender offer invites shareholders to sell their shares at a stated price, often above market value, and is primarily regulated by federal securities law. The Securities Exchange Act of 1934 and related SEC rules control disclosures, timing, and communications during the offer. Texas law still influences how shares transfer and how corporate records reflect ownership changes.
Texas law places management authority in the board of directors, and directors owe fiduciary duties of loyalty and care to the corporation. When a hostile takeover arises, directors may evaluate the offer and decide whether it aligns with the company’s interests. Courts generally defer to directors’ decisions when they act in good faith, rely on reasonable information, and follow proper procedures.
Shareholders hold the power to accept a tender offer or vote to replace directors during a proxy contest. Their decisions determine whether control shifts to the acquiring party. Texas law protects voting rights and requires accurate disclosures so shareholders can make informed choices.
Advance planning can shape how a company responds to a hostile takeover attempt. Corporate bylaws, voting structures, and shareholder agreements influence how much leverage an outside buyer gains. Understanding these rules helps business owners and shareholders respond strategically if a takeover effort occurs.
]]>One partner makes a financial decision without consulting the other. One notices the other leaving early while they stay late. Or perhaps both realize they have completely different ideas about the company’s direction—and neither intends to budge.
Whatever the trigger, something has shifted. The person who once seemed like the ideal business partner now feels like an obstacle.
Business partner disputes rank among the most frequent causes of otherwise healthy companies falling apart. They are also among the most preventable business disasters—for those who recognize them early.
Why Partnership Disputes Are Especially Destructive
A disagreement with a vendor is annoying. A lawsuit from a customer is stressful. A fight with a business partner is existential.
A business partner is not merely a colleague. Partners typically hold signing authority on bank accounts. They can bind the company to contracts. They interact with employees and customers daily. Depending on the ownership structure, major decisions—including the sale of an ownership stake—may require their cooperation.
When that relationship breaks down, everything becomes harder. Decisions stall. Employees sense the tension and begin seeking other opportunities. Customers notice the disorder. Money that should fuel growth goes to attorneys instead.
What Causes Most Partnership Disputes
On the surface, partners fight about money, strategy, or workload. Underneath, most disputes stem from a handful of recurring issues:
Before solving a partnership dispute, the parties must understand what is actually driving it. The presenting issue is rarely the whole story.
Warning Signs That Trouble Is Brewing
Partnership disputes rarely explode without warning. They simmer. Early detection preserves more options for resolution.
These patterns signal trouble:
Several of these patterns appearing together indicate the early stages of a dispute. Early intervention is far more effective than crisis management.
The First Step: Review the Partnership Agreement
Before taking any action, locate the partnership agreement, operating agreement, or shareholders’ agreement and review it carefully.
A properly drafted agreement should answer these questions:
The agreement may already provide a resolution framework. It may also reveal gaps that are exacerbating the current conflict.
Businesses without written agreements are governed by state default rules. In Texas, the Texas Business Organizations Code controls. In Utah, the applicable statute is the Utah Revised Uniform Limited Liability Company Act or the Utah Revised Uniform Partnership Act, depending on entity type. These defaults may not reflect what the partners intended.
What Comes Next
Recognizing a partnership dispute early creates options. The next step is determining how to resolve it—whether through direct conversation, mediation, or legal action. Contact us to schedule a consultation with Victoria Filippov Nemeth, a business attorney and certified mediator with over 25 years of experience resolving partnership disputes.
]]>Start with Direct Conversation
Many partnership disputes escalate because the partners never discuss what is actually wrong. They complain to spouses. They vent to employees. They consult attorneys. They never sit down together and state plainly: here is the problem, here is what I need, and I want to understand your perspective.
That conversation is uncomfortable. It may also be the fastest path to resolution.
For direct negotiation to succeed:
Direct conversation does not always succeed. When trust is broken, or when one partner refuses to engage in good faith, formal intervention becomes necessary. Skipping this step, however, forecloses the possibility that a straightforward discussion could have resolved the matter.
When Mediation Makes Sense
When direct negotiation fails, or when the conflict has grown too heated for productive dialogue, mediation offers a structured alternative. In mediation, a neutral third party helps the disputing partners communicate, identify their respective interests, and negotiate a resolution. Unlike a judge or arbitrator, the mediator does not decide who is right or impose a solution. The mediator facilitates a process that enables the parties to reach their own agreement.
Mediation is particularly effective for partnership disputes:
Not every dispute can be mediated. Partners acting in bad faith, hiding assets, or refusing to participate may require other remedies. For most partnership conflicts, however, mediation is worth attempting before escalation.
Legal Options When Negotiation Fails
When direct conversation and mediation do not resolve the dispute, partners must understand the available legal alternatives.
Buyout
One partner purchases the other’s ownership stake. This is often the cleanest resolution—one person retains the business, the other receives payment, and both move forward.
Buyouts may be negotiated voluntarily or triggered under agreement terms. The difficult issues are typically valuation and payment terms. Departing partners also commonly face non-compete restrictions and transition questions regarding customer and employee relationships.
Dissolution
When partners cannot agree on any alternative, the business may need to be wound down. Assets are sold, debts are paid, and remaining proceeds are distributed according to ownership percentages or agreement terms.
Dissolution is usually the worst financial outcome. Forced asset sales rarely yield full value. Customers and employees depart. Sometimes, however, it is the only option available to deadlocked partners.
Litigation
One partner sues the other for breach of fiduciary duty, breach of contract, fraud, conversion, or other claims. Litigation is expensive, slow, public, and unpredictable. It should serve as a last resort—though it becomes necessary when a partner has engaged in serious misconduct.
Involuntary Removal
Depending on the agreement and applicable state law, expelling a partner for cause may be possible. This typically requires specific grounds—material breach, illegal conduct, or behavior making continuation of the business impracticable. The process is legally complex.
Each path carries significant implications. Choosing incorrectly—or executing poorly—can create liability, forfeit rights, or destroy value the parties sought to protect.
Choosing the Right Approach
The appropriate resolution method depends on several factors:
Most disputes benefit from attempting resolution in order of escalation: direct conversation first, then mediation, then legal action. Each step preserves options while avoiding unnecessary cost and conflict.
Get Legal Guidance
Contact us to schedule a consultation with Victoria Filippov Nemeth, a business attorney and certified mediator with over 25 years of experience resolving partnership disputes through negotiation, mediation, and litigation.
]]>