Civil Litigation
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Single Business Enterprise

© 2013 Mark Courtois

Single Business Entity is not a cause of action, but rather a theory for imposing liability where two or more business entities act as one.  Beneficial Personnel Servs. of Texas, Inc. V. Rey, 927 S.W.2d 157, 164 (Tex. App.–El Paso 1996), vacated without reference to merits, remanded in accordance with settlement agr., 938 S.W.2d 717 (Tex. 1997).  In Texas, it no longer a viable theory for imposing liability for one corporation's obligations on another.  SSP Partners and Metro Novelties, Inc., v. Gladstrong Investments (USA) Corp, 275 S.W.3d 444, 456 (Tex. 2008).

Under the theory, when corporations are not operated as separate entities but rather integrate their resources to achieve a common business purpose, the corporate structure may be disregarded, and each corporation may be held liable for wrongful acts done, or the debts incurred, in pursuit of that purpose.  Paramount Petroleum Corp. v. Taylor Rental Center, 712 S.W.2d 534, 536 (Tex. App.--Houston [14th Dist.] 1986, writ ref'd n.r.e.).  According to the Paramount Petroleum decision, the factors to be considered in determining whether the constituent corporations have not been maintained as separate entities include but are not limited to the following:

  1. common employees; 
  2. common offices;
  3. centralized accounting; 
  4. payment of wages by one corporation to another corporation's employees; 
  5. common business name; 
  6. services rendered by the employees of one corporation on behalf of another corporation; 
  7. undocumented transfers of funds between corporations; and
  8. unclear allocation of profits and losses between corporations.

Id.   In 2009, the Texas Supreme Court determined that the single business enterprise liability theory set out in Paramount Petroleum is not consisitent with the Texas Legislatures’ approach taken in the Texas business statutes, and will not support the imposition of one corporation's obligations on another.  SSP Partners at 456.  See Alter Ego liability for a discussion of Texas statutes that govern the imposition of libility for one corporation's obligation to another coproration.