Legal Services

	“One of my fellow elected officials has a financial interest in a local business. I’m curious what it means to have substantial interest in a business entity.”

What is a “substantial interest” in a business entity?

Under Local Government Code §171.002(a), a person is considered to have a substantial interest in a business entity if the person: 

1. Owns 10% or more of the voting stock or shares of the business entity.
2. Owns 10% or $15,000 or more of the fair market value of the business entity.
3. Receives funds from the business entity that exceed 10% of the person's gross income for the previous year.

Under Chapter 171 of the Local Government Code, having a substantial interest in a business entity, or being closely related to a person with such an interest in a business entity, may trigger specific conflict-of-interest requirements and procedures.

For more information, see our updated publication Pitfalls & Perils of Public Office.