USA – TEXAS Law and Practice Contributed by: Taylor Cooksey, Philip Kinkaid, Serena Kramer and David Brooks, Cokinos | Young
by the entity. REITs are subject to Texas fran - chise tax if formed as a corporation. REITs in Texas may be either public or private and are available to foreign investors. REITs must comply with federal requirements in order to maintain their status. 5.4 Minimum Capital Requirement There are no minimum capital requirements in Texas for the entities listed in 5.2 Main Features and Tax Implications of the Constitution of Each Type of Entity . 5.5 Applicable Governance Requirements Governance requirements for partnerships, LLCs and corporations are set forth in the Tex - as Business Organizations Code and may also be set forth in written partnership agreements, company or operating agreements, by-laws and shareholders’ agreements, in addition to certifi - cates of formation. Governance requirements for trusts are set forth in the Texas Trust Code (part of the Property Code) and trust agreements. The federal Corporate Transparency Act (CTA) would have imposed an important new govern - ance requirement on many private companies by requiring reporting of their beneficial owners, but a recent rule issued under the CTA renders the CTA inapplicable to US entities. 5.6 Annual Entity Maintenance and Accounting Compliance Taxable entities formed or doing business in Texas are subject to Texas franchise tax. The income of certain entities below a designated threshold is not subject to franchise tax. As indi - cated in 5.2 Main Features and Tax Implica- tions of the Constitution of Each Type of Entity , certain entities are subject to a filing fee upon
formation, and foreign entities qualifying to do business in Texas must file a registration fee; certain annual reporting may also be required, but no fee is applicable. 6. Commercial Leases 6.1 Types of Arrangements Allowing the Use of Real Estate for a Limited Period of Time The most common types of arrangement for the temporary use of real estate are leases, licences and easements. A lease grants the lessee exclu - sive possession of property for a limited dura - tion. Licence agreements are usually for a sub - stantially shorter duration than a lease and are not considered an interest in real property, and are used to grant the right to occupy property for a limited duration for a specific purpose. Ease - ments grant the exclusive or non-exclusive right to use property (but not the right to occupy) for a specific purpose. 6.2 Types of Commercial Leases Net Lease The net lease is the most prevalent type of com - mercial lease in Texas. In addition to base rent, a tenant under a net lease paysa proportion - ate share of the landlord’s operating expenses, which may include property taxes, insurance and maintenance costs, and which vary over time. Net leases are widely used in all commer - cial sectors, including office, retail and industrial. Gross Lease A tenant under a gross lease pays a fixed rent amount, and the landlord is responsible for all operating expenses. Gross leases are often used in office leasing, but rarely in other sectors.
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