Texas clauses relating to initial capital contributions are provisions included in various legal agreements, particularly in the context of business formations such as partnerships, limited liability companies (LCS), and corporations. These clauses outline the rules and obligations related to the initial monetary investments made by partners or shareholders when establishing the entity. Here is a detailed description of some types of Texas clauses relating to initial capital contributions: 1. Capital Contribution Requirement: This clause states the minimum amount of capital that each partner or shareholder must contribute when joining the business entity. In Texas, the law allows partners or shareholders to agree on the required capital contributions as they see fit. The clause may specify a fixed amount, percentage share, or a combination of both. 2. Timing and Installments: This type of clause specifies the timing and method of making initial capital contributions. It may set specific dates or milestones for payment, or it may permit contributions to be made in installments over a defined period. Additionally, the clause may outline the consequences for late or missed payments. 3. Non-Cash Contributions: This clause addresses the permissibility and valuation of non-cash contributions, such as property, services, or intellectual property, instead of or in addition to cash. It can provide guidance on how non-cash contributions should be appraised, adjusted, or verified, ensuring a fair and equitable distribution of ownership interests. 4. Capital Account Maintenance: A capital account tracks the capital contributions made by each partner or shareholder, as well as the share of profits, losses, and distributions allocated to them. This clause outlines the mechanisms for maintaining and updating capital accounts, including rules for adjustments, interest allocations, and the treatment of capital account deficits or surpluses. 5. Optional Additional Contributions: In some cases, the agreement may include an optional clause that allows partners or shareholders to make additional capital contributions beyond the initial requirement. This clause typically outlines the procedures and limitations for such additional contributions, including voting rights implications and the impact on ownership percentages. 6. Transferability of Capital Contributions: This clause specifies the conditions and restrictions regarding the transferability of capital contributions. It may address the circumstances under which a partner or shareholder can sell or assign their ownership interest, including approval requirements from other partners or shareholders. It is important to note that the exact language and provisions of Texas clauses relating to initial capital contributions may vary depending on the specific business entity and the agreement reached between the parties involved. Therefore, it is advisable to consult with a legal professional well-versed in Texas business law to ensure these clauses accurately reflect the needs and intentions of all parties involved.
Texas Clauses Relating to Initial Capital contributions
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The most common capital contribution is cash, but you can also contribute property, such as office space, vehicles, and equipment. It's also possible to contribute services to an LLC.
What Is Contributed Capital? Contributed capital, also known as paid-in capital, is the cash and other assets that shareholders have given a company in exchange for stock. Investors make capital contributions when a company issues equity shares based on a price that shareholders are willing to pay for them.
One of the most important sections in the operating agreement is the capital contribution section. A capital contribution section usually addresses what happens if members fail to contribute their portion of the initial start-up capital.
This clause should be used when one member contributed real property to the joint venture in exchange for membership interests and another member has contributed capital. The capitalized terms and section references used in this clause should be conformed to the relevant joint venture operating agreement.
The IRS permits tax free capital contributions of non-cash assets as long as the value of the asset equals the value of the equity received in exchanged. If the value of the asset is less than the value of the equity received, the excess amount may be a taxable gain.
One of the most important sections in the operating agreement is the capital contribution section. A capital contribution section usually addresses what happens if members fail to contribute their portion of the initial start-up capital.
Example of Contributed Capital For example, a company issues 5,000 $1 par value shares to investors. The investors pay $10 a share, so the company raises $50,000 in equity capital. As a result, the company records $5,000 to the common stock account and $45,000 to the paid-in capital in excess of par.
This clause should be used when one member contributed real property to the joint venture in exchange for membership interests and another member has contributed capital. The capitalized terms and section references used in this clause should be conformed to the relevant joint venture operating agreement.