BUSINESS ORGANIZATIONS CODE

TITLE 1. GENERAL PROVISIONS

CHAPTER 1.

DEFINITIONS AND OTHER GENERAL PROVISIONS

SUBCHAPTER A.

DEFINITIONS AND PURPOSE

Sec. 1.001. PURPOSE. The purpose of this code is to make the law encompassed by this code more accessible and understandable by:

(1) rearranging the statutes into a more logical order;

(2) employing a format and numbering system designed to facilitate citation of the law and to accommodate future expansion of the law;

(3) eliminating repealed, duplicative, expired, executed, and other ineffective provisions; and

Acts 2003, 78th Leg., ch. 182,

Sec. 1, eff. Jan. 1, 2006.

Sec. 1.002.

DEFINITIONS. In this code:

(1) "Affiliate" means a person who controls, is controlled by, or is under common control with another person.

(2) "Associate," when used to indicate a relationship with a person, means:

(

A) a domestic or foreign entity or organization for which the person:

(

i) is an officer or governing person; or

(ii) beneficially owns, directly or indirectly, either individually or through an affiliate, 10 percent or more of a class of voting ownership interests or similar securities of the entity or organization;

(

B) a trust or estate in which the person has a substantial beneficial interest or for which the person serves as trustee or in a similar fiduciary capacity;

(

C) the person's spouse or a relative of the person related by consanguinity or affinity who resides with the person; or

(

D) a governing person or an affiliate or officer of the person.

(3) "Association" means an entity governed as an association under Title 6 or 7. The term includes a cooperative association, nonprofit association, and professional association.

(4) "Assumed name" means a name adopted for use by a person. The term includes an assumed name filed under

Chapter 71 , Business & Commerce Code.

(5) "Business" means a trade, occupation, profession, or other commercial activity.

(6) "Certificate of formation" means:

(

A) the document required to be filed with the filing officer under

Chapter 3 to form a filing entity; and

(

B) if appropriate, a restated certificate of formation and all amendments of an original or restated certificate of formation.

(7) "Certificated ownership interest" means an ownership interest of a domestic entity represented by a certificate issued in bearer or registered form.

(8) "Close corporation" means a for-profit corporation that elects to be governed as a close corporation in accordance with Subchapter O ,

Chapter 21 .

(9) "Contribution" means a tangible or intangible benefit that a person transfers to an entity in consideration for an ownership interest in the entity or otherwise in the person's capacity as an owner or a member. The benefit includes cash, services rendered, a contract for services to be performed, a promissory note or other obligation of a person to pay cash or transfer property to the entity, or securities or other interests in or obligations of an entity, but does not include cash or property received by the entity:

(

A) with respect to a promissory note or other obligation to the extent that the agreed value of the note or obligation has previously been included as a contribution; or

(

B) that the person intends to be a loan to the entity.

(10) "Conversion" means:

(

A) the continuance of a domestic entity as a non-code organization of any type;

(

B) the continuance of a non-code organization as a domestic entity of any type;

(

C) the continuance of a domestic entity of one type as a domestic entity of another type;

(

D) the continuance of a domestic entity of one type as a foreign entity of the same type that may be treated as a domestication, continuance, or transfer transaction under the laws of the jurisdiction of formation of the foreign entity; or

(

E) the continuance of a foreign entity of one type as a domestic entity of the same type that may be treated as a domestication, continuance, or transfer transaction under the laws of the jurisdiction of formation of the foreign entity.

(11) "Converted entity" means an organization resulting from a conversion.

(12) "Converting entity" means an organization as the organization existed before the organization's conversion.

(13) "Cooperative" or "cooperative association" means an association governed as a cooperative association under

Chapter 251 .

(14) "Corporation" means an entity governed as a corporation under Title 2 or 7. The term includes a for-profit corporation, nonprofit corporation, and professional corporation.

(15) "Debtor in bankruptcy" means a person who is the subject of:

(

A) an order for relief under the United States bankruptcy laws (Title 11, United States Code); or

(

B) a comparable order under a:

(

i) successor statute of general applicability; or

(ii) federal or state law governing insolvency.

(16) "Director" means an individual who serves on the board of directors of a foreign or domestic corporation.

(17) "Domestic" means, with respect to an entity, that the entity is formed under this code or the entity's internal affairs are governed by this code.

(18) "Domestic entity" means an organization formed under or the internal affairs of which are governed by this code.

(19) ""Domestic entity subject to dissenters' rights" means a domestic entity the owners of which have rights of dissent and appraisal under this code or the governing documents of the entity.

(20) "Effective date of this code" means January 1, 2006. The applicability of this code is governed by Title 8.

(20-a) "Electronic data system" means an electronic network or database. The term includes a distributed electronic network or database, including one that employs blockchain or distributed ledger technology.

(20-b) "Electronic transmission" means a form of communication, including communication by use of or participation in one or more electronic data systems, that:

(

A) does not directly involve the physical transmission of paper;

(

B) creates a record that may be retained, retrieved, and reviewed by the recipient; and

(

C) may be directly reproduced in paper form by the recipient through an automated process.

(21) "Entity" means a domestic entity or foreign entity.

(21-a) "Fictitious name" means an assumed name:

(

A) that a foreign filing entity adopts for use because the name of the entity as stated in the entity's certificate of formation or similar organizational instrument is not available for use under the laws of this state; and

(

B) under which the foreign filing entity is registered to transact business in this state, in accordance with

Chapter 9 .

(22) "Filing entity" means a domestic entity that is a corporation, limited partnership, limited liability company, professional association, cooperative, or real estate investment trust.

(23) "Filing instrument" means an instrument, document, consent, or statement that is required or authorized by this code to be filed by or for an entity with the filing officer in accordance with

Chapter 4 .

(24) "Filing officer" means:

(

A) with respect to an entity other than a domestic real estate investment trust, the secretary of state; or

(

B) with respect to a domestic real estate investment trust, the county clerk of the county in which the real estate investment trust's principal office is located in this state.

(25) "For-profit corporation" means a corporation governed as a for-profit corporation under

Chapter 21 .

(26) "For-profit entity" means an entity other than a nonprofit entity.

(27) "Foreign" means, with respect to an entity, that the entity is formed under, and the entity's internal affairs are governed by, the laws of a jurisdiction other than this state.

(28) "Foreign entity" means an organization formed under, and the internal affairs of which are governed by, the laws of a jurisdiction other than this state.

(29) "Foreign filing entity" means a foreign entity, other than a foreign limited liability partnership, that registers or is required to registe