Taking the entrepreneurial leap and forming a Limited Liability Company (LLC) in Texas is an enticing option for many aspiring business owners. T ...
Texas LLC Operating Agreement Template
Written by: Natalie Fell
Natalie is a business writer with experience in operations, HR, and training & development within the software, healthcare, and financial services sectors.
Edited by: David Lepeska
David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.
Updated on May 7, 2023
Texas LLC Operating Agreement Template
In Texas, your limited liability company (LLC) is not required to have an operating agreement in place. But it’s highly recommended, as an effective operating agreement can help avoid disputes and lawsuits that could threaten the stability of your LLC.
What is an LLC Operating Agreement?
A Texas LLC operating agreement is an important legal document that details who owns the business and provides essential information pertaining to member duties. An LLC operating agreement establishes the financial relationship between members and the basics of the working relationships between those members and the managers who oversee daily operations.
The operating agreement is not filed with the state, but instead remains private. It’s advisable to hire an attorney to ensure your operating agreement is thorough and legally binding.
We’ve provided two operating agreement templates for your use. One is for a single-member LLC if you are the sole member, and the other is for a multi-member LLC if your LLC has two or more members. The documents are customizable and should be adjusted for Texas state and your business. These documents are for your internal use and are not filed with any governing body.
Download FREE Operating Agreement Templates
Disclaimer: These documents may need to be adjusted based on your circumstances and may not cover all situations. Your document also may need to be adjusted over time as your business evolves. These documents should not be considered legal advice. You should have your version of the document reviewed by your attorney to make sure that all necessary provisions are included to fit your business situation.
What Should Your Texas LLC’s Operating Agreement Include?
Here are some key provisions to include in your Texas LLC’s operating agreement:
- Basic Information: Include the company’s name, principal office address, the date of formation, and the purpose of the LLC.
- Members and Ownership: List the names and addresses of all members, their ownership percentage, and initial capital contributions.
- Management Structure: Specify whether your LLC will be member-managed or manager-managed, and outline the roles and responsibilities of each member or manager. If the LLC has a board of directors, the operating agreement will also include the role and responsibilities of the board members and how they are compensated.
- Voting Rights and Procedures: Define the voting rights of members, the necessary quorum for meetings, and the decision-making process for important company decisions.
- Profit and Loss Distribution: Outline the process for distributing profits and losses among members, including the frequency and method of distribution.
- Capital Contributions and Additional Contributions: Detail any requirements for additional capital contributions from members, and the process for making those contributions.
- Member Withdrawal and Dissociation: Describe the process for a member to withdraw or dissociate from the LLC, including any buyout provisions, restrictions, or rights of first refusal.
- Dissolution and Winding Up: Explain the circumstances that would trigger dissolution, as well as the process for winding up the LLC’s affairs, such as paying off debts, selling assets, and distributing remaining assets to members.
- Recordkeeping and Financial Information: Establish the process for maintaining financial records, preparing annual reports, and conducting audits, if necessary.
- Amendments: Outline the procedures for making amendments to the operating agreement, including the required vote or consent of members.
- Dispute Resolution: Include a provision for resolving disputes among members, such as mediation or arbitration.
- Governing Law: Specify that Texas law will govern the operating agreement and any disputes arising from it.
- Miscellaneous Provisions: Include any additional provisions relevant to your specific LLC, such as non-compete clauses, confidentiality agreements, or indemnification of members and managers.
An LLC operating agreement provides legal and financial recourse for a number of situations. If conflicts arise between LLC owners pertaining to any of the above issues, the operating agreement will provide clarity. The specific language of the operating agreement lays out exactly how such conflicts will be resolved, how the business is structured, the dynamics of operations, and more.
Though Texas has default rules on the books that address some of the issues that might arise between LLC members, your LLC operating agreement would override these default laws and give you greater control.
Remember that the above suggestions are general guidelines and may not cover all aspects relevant to your specific business. It is always a good idea to consult with an attorney when drafting an operating agreement to ensure that it meets the unique needs of your Texas LLC.
How Much Does an Operating Agreement Cost?
Creating an operating agreement is free if you just draw it up yourself. Alternatively, you can pay for guidance from an online business advisory like ZenBusiness.
This is an extremely important document, so it’s recommended that you hire a professional service or law firm. If you choose to use an attorney to help you create this document, the price will be around $500 for a single-member LLC and $2,500 for a multi-member LLC.
Who Needs my LLC Operating Agreement?
One of the key reasons to have an operating agreement in place is that it makes your LLC more appealing to financial backers. Banks are likely to request to see your operating agreement when you apply for a loan. If you seek funding from investors, they will also want to see your operating agreement.
Though not legally required in Texas, an operating agreement is a crucial document for LLC operations, ensuring your company is able to access adequate financing and settle any disputes. Keep in mind, you do not need to file your operating agreement with any state body. You simply need to take certain steps to ensure it’s legally binding and keep it in your records.
How to Start an LLC in Texas
Published on March 18, 2022
Member-Managed vs. Manager-Managed LLCs
Published on January 10, 2022
When starting a business, there are many things to consider. If you’ve made the choice to form a limited liability company (LLC) you’ll need tod ...
How to Start a Business in Texas
Published on December 7, 2021
Texas, known as The Lonestar State, is home to the Alamo, and the major cities of Dallas, Houston, and San Antonio. Its sprawling landscape includes ...