How to Draft a Texas LLC Operating Agreement

A Texas LLC operating agreement is a private contract between the owners of an LLC. It sets the rules for how the business is owned and run. Texas law calls it a “company agreement.” It can be written or oral, but a written one is easier to show to a bank or a court. It is not filed with the Texas Secretary of State, so most owners keep it with their business records.

Does Texas Require an Operating Agreement for an LLC?

No. Texas does not require an LLC to have an operating agreement.

But Texas law still recognizes the agreement. §101.052 says the company agreement governs the LLC. If your agreement doesn't have a rule on something, the state's default rules fill the gap. Without an agreement, those defaults govern everything, and they may not match how you want to run the business.

What Should a Texas LLC Operating Agreement Include?

A good Texas operating agreement includes core clauses that explain member voting rights, ownership percentages, profit distributions, amendments, and more.

If you are writing your own operating agreement, you can copy the sample language shared below or use it as a starting point.

If you are the only member, focus on the sections on name and address, ownership, contributions, management, profits and distributions, liability, taxes, records, and dissolution. Sections on voting, meetings, transfers, and conflicts matter once you add owners.

1. LLC Name, Address, and Registered Agent

Texas rule: Your LLC's name must match the name stated in its Certificate of Formation. Every Texas LLC must have a registered agent and a registered office in Texas. The registered office must be a physical street address where the registered agent can be personally served during normal business hours. It cannot be solely a mailbox or telephone answering service (§5.201)

Why it matters: A mismatch between your agreement and your state filing creates doubt about which document is right.

Sample clause: The name of the Company is [LLC Name], a Texas limited liability company. The principal office is at [address]. The registered agent is [name] at [Texas street address]. The Company was formed on [date] by filing a Certificate of Formation with the Texas Secretary of State. The Company may carry on any lawful business that matches its intended purpose and will continue until it is dissolved under this Agreement or Texas law.

2. Members and Ownership Percentages

Texas rule: Texas calls your share of the LLC a "membership interest" (§101.106). A membership interest is personal property. A member can assign the interest, but the recipient does not automatically become a member or receive voting rights. The operating agreement should explain how ownership transfers work, including what happens when a member dies.

Why it matters: This is one of the most important clauses. It says who owns what. Write it as a table with names and percentages.

Sample clause: The Members and their Membership Interests are listed in Schedule A. The percentages in Schedule A total 100%. Schedule A is updated whenever a Membership Interest is issued or transferred.

3. Single-Member LLC (Sole Owner)

Texas rule: An agreement for an LLC with one member is still enforceable. The law says it is not invalid just because only one person is a party. A Texas LLC needs at least one member.

Why it matters: Many solo owners skip the agreement because they have no one to sign with. But a written agreement is important to show how the business is owned and run. Some banks also ask to see one.

Sample clause: [Member Name] is the sole Member of the Company and owns 100% of the Membership Interests. Before any new Member is admitted, this Agreement will be amended and restated to reflect the new ownership.

4. Capital Contributions

Texas rule: A promise to contribute money or property is only enforceable if it is in writing and signed (§101.151). Texas does not require members to contribute more later.

Why it matters: Spoken promises to contribute are generally not enforceable in Texas. If your partner says they will invest money, get the amount in the agreement.

Sample clause: Each Member has contributed the cash or property listed in Schedule A. No Member is required to make additional contributions unless all Members agree in writing. No interest is paid on contributions.

5. How Members Vote in a Texas LLC

Texas rule: By default, every member has one equal vote (§101.354). Ownership percentage does not matter unless your agreement says it does.

Why it matters: Most owners want votes to match ownership. If you own 70%, you may probably want voting power to match ownership percentages. The default rule gives you one vote out of however many members there are.

Sample clause: Each Member votes in proportion to their Membership Interest. A “Majority Vote” means Members holding more than 50% of all Membership Interests. A “Supermajority Vote” means Members holding at least [75%]. Unless this Agreement says otherwise, decisions require a Majority Vote.

The following require a Supermajority Vote:

(a) Amending this Agreement

(b) Selling all or most of the Company’s assets

(c) Merging or converting the Company

(d) Dissolving the Company

(e) Taking on debt over [amount]

Admitting a new Member requires the written consent of all Members.

6. Member-Managed or Manager-Managed

Texas rule: A Texas LLC is member-managed unless the company agreement or the Certificate of Formation says it has managers. Managers do not have to be members or Texas residents. If your Certificate of Formation lists managers, changing that structure means amending the Certificate, which needs approval from every member.

Why it matters: The structure decides who can sign contracts for the company. A person acting in the ordinary course of business can bind the LLC unless they lack authority and the other side knows it. The agreement should name who has that authority.

Sample clause: The Company is [member-managed / manager-managed]. [The Members / The Managers] have full authority to manage the Company and sign contracts on its behalf. [Manager Name] serves as Manager until resigning or being removed by a Majority Vote of the Members.

7. Meetings and Written Consent

Texas rule: Chapter 101 does not require an LLC to hold annual meetings. If a meeting is held, notice must be in writing, and a majority of all members is a quorum (§§101.352, 101.353). Members can also act without a meeting through a written consent signed by enough members to pass the vote (§101.358).

Why it matters: Most small LLCs rarely meet. A simple process for written consent keeps big decisions on paper. That paper helps if a partner, bank, or buyer asks later.

Sample clause: The Members may meet at any time they agree. Any Member may call a special meeting with at least [10] days’ written notice. Members may attend by phone or video. Any action may be taken without a meeting if Members holding enough votes to approve it sign a written consent. The Company will keep all signed consents with its records.

8. How Profits, Losses, and Distributions Work

Texas rule: The default split of profits and losses is based on the agreed value of each member’s contribution, as recorded in the company books (§101.201). Distributions follow the same default (§101.203). No member can demand a distribution until the company’s governing authority declares one (§101.204). The LLC cannot pay a distribution if, right after it, its liabilities would be more than the fair value of its assets (§101.206). A member who gets a prohibited distribution has to return it only if they knew it broke the rule.

Why it matters: If one member contributes cash and another contributes services, the value recorded for each contribution can affect how profits and losses are allocated under Texas default rules. The agreement should clearly state how contributions are valued and how profits, losses, and distributions are divided.

Sample clause: Profits and losses are allocated to the Members in proportion to their Membership Interests as listed in Schedule A. Distributions are made in the same proportions, at the times and in the amounts approved by a Majority Vote. The Company will not make a distribution that Texas Business Organizations Code §101.206 prohibits. If cash is available, the Company will distribute each year enough to cover each Member’s estimated income tax on Company profits.

9. Adding a New Member or Transferring Ownership

Texas rule: You can sell your membership interest. But the buyer only gets your share of profits and distributions (§101.108). The buyer does not become a member and cannot vote unless all existing members approve (§101.109).

Why it matters: You do not want a stranger as a partner. A right of first refusal lets the other members buy the interest first.

Sample clause: A Member may not transfer any Membership Interest without first giving written notice to the Company and the other Members stating the price, terms, and name of the proposed buyer. The Company has 30 days from receiving the notice to buy all or part of the interest. If the Company does not buy all of it, the other Members have 30 days from the end of the Company’s period to buy the rest, in proportion to their Membership Interests.

If the interest is not fully bought, the Member may sell the rest to the proposed buyer within 60 days after the second period ends, at a price and terms no better than those offered. A buyer who is not approved by all Members receives only the right to Profits and distributions and has no vote.

10. Limited Liability and Indemnification

Texas rule: Members and managers are not personally liable for the LLC’s debts unless the company agreement says otherwise. An LLC may also indemnify its members, managers, and officers, advance their legal costs, and buy insurance for them (§101.402). The company agreement can establish the rules and limits for these protections.

Why it matters: Limited liability is a main reason owners form an LLC, so it helps to state it in writing. An indemnification clause means the Company pays legal bills for good-faith acts. Without one, the person sued may have to pay.

Sample clause: Members and Managers are not personally liable for the debts or obligations of the Company because of their role. The Company will indemnify any Member, Manager, or officer against claims, losses, and legal costs from acts taken in good faith for the Company. This does not cover fraud, willful misconduct, or a knowing violation of law. The Company may buy liability insurance for these persons.

11. Conflicts of Interest and Dealings with Affiliates

Texas rule: A deal between the LLC and a manager, officer, or a business they partly own stays valid in two cases. One is when the facts are disclosed and the disinterested people approve it. The other is when the deal is fair to the company (§101.255). The company agreement can also expand, restrict, or remove duties owed by members and managers, including fiduciary duties (§101.401). [1]

Why it matters: Owners often rent space to their own LLC or lend it money. Written ground rules help prevent a later fight about whether the deal was fair. Removing duties can hurt minority owners, so a lawyer should review that choice.

Sample clause: The Company may do business with a Member, a Manager, or their affiliates if the terms are no less favorable to the Company than terms from an unrelated party. The interested person must disclose the conflict in writing before the Company agrees to the deal.

12. Bookkeeping, Fiscal Year, and Records

Texas rule: Every Texas LLC must keep certain business records, including a current list of its members and their ownership interests, tax returns for the six preceding tax years, its Certificate of Formation, its company agreement if written, and records of member contributions. The LLC must also keep other books and records required by Texas law (§101.501). Members generally have the right to inspect and copy relevant company records by making a written request that states a proper purpose (§101.502).

Why it matters: Accurate records help track ownership, contributions, and business finances. They can also help the LLC respond to tax questions and document that it operates as a separate business.

Sample clause: The Company's fiscal year is the calendar year. The Company uses the [cash/accrual] method of accounting, as permitted by applicable law. The Company will maintain the records required by Texas law at its principal office or make them available as required by law. A Member may request to inspect and copy Company records in accordance with Texas Business Organizations Code §101.502 and the Company's governing documents

13. Tax Classification and S Corp Election Clause

Texas rule: Texas does not impose an individual income tax. However, an LLC may have Texas franchise tax or other state tax obligations, depending on its activities and circumstances. For federal tax purposes, a single-member LLC is generally treated as a disregarded entity, while a multi-member LLC is generally treated as a partnership unless it elects S Corp status.

Why it matters: An S-corp election can potentially lower self-employment tax once profits are high enough. But it changes how members are paid. Your agreement should say who can make the election and how it works.

Sample clause: The Company is taxed as a [partnership/disregarded entity] unless all Members consent in writing to a different classification. If the Company elects S corporation status, all distributions will be made in proportion to Membership Interests as required by federal tax law, and any Member who performs services will receive reasonable compensation as a W-2 employee.

14. Dissolving the LLC

Texas rule: Voluntary winding up needs a majority vote of all members by default, and your agreement can set a different vote (§101.552). After winding up, you file a Certificate of Termination (Form 651) with the Secretary of State. You must also obtain a certificate of account status from the Texas Comptroller showing that the LLC meets the tax requirements for termination. The certificate must remain valid through the effective filing date.

Why it matters: Decide ahead of time what events end the LLC and how leftover assets are split.

Sample clause: The Company will be dissolved on:

(a) A supermajority vote of members.

(b) The sale of all Company assets

(c) Any event that requires winding up under Texas law.

After paying creditors, remaining assets are distributed to Members in proportion to their Membership Interests.

Extra Clauses for Multi-member LLCs, Couples, and Real estate owners

15. Member Withdrawal or Removal

Texas rule: Under the default rule, a member cannot withdraw and cannot be expelled (§101.107). You are in until the LLC closes or everyone agrees to let you go. However, the company agreement may establish permitted withdrawal procedures.

Why it matters: If you want an exit door, your agreement has to build one. Set the notice period, the buyout price, and the payment terms.

Sample clause: A Member may withdraw by giving 90 days' written notice. The Company will buy the withdrawing Member's interest at fair market value, paid as stated in the transfer clause. A Member may be removed by a supermajority for fraud, a felony conviction, or a material breach of this Agreement.

‘Fair Market Value’ means the value set by an independent appraiser chosen by the Company. Any buyout of a Member’s interest under this Agreement is paid over 24 months unless the Members agree otherwise.

16. Death or Divorce of a Member (Texas community property)

Texas rule: Texas is a community property state. A membership interest you get while married can be community property. §101.1115 says that on death or divorce, the spouse or heir who gets part of your interest becomes an assignee, not a member. They get a share of profits. They do not get a vote unless the agreement says otherwise.

Why it matters: Without this clause, a member's ex-spouse or heir can end up with a piece of your LLC. Your agreement should say the Company or the other members can buy that interest back.

Sample clause: If a Member dies, or if a court awards any part of a Member's interest to a spouse or heir in a divorce, the Company and then the remaining Members have the option to buy that interest at fair market value within 90 days. Until bought out, the spouse or heir is only an assignee, with no voting rights.

17. Dispute Resolution and Deadlock

Texas rule: Texas has no default rule for breaking a tie between members. If two 50/50 owners disagree, the business can freeze. A court may order the LLC wound up based on the applicable statutory grounds.

Why it matters: Lawsuits between partners are slow and expensive. A step-by-step process keeps you out of court.

Sample clause: If the Members cannot agree on a matter after 30 days, they will first try mediation in [county], Texas. If mediation fails within 60 days, the dispute goes to binding arbitration under the rules of the American Arbitration Association. For a 50/50 deadlock, either Member may trigger a buy-sell: one Member names a price, and the other chooses to buy or sell at that price.

18. Series LLC Clause (Texas)

Texas rule: Texas lets an LLC set up separate “series,” each with its own assets and liability protection (§101.601). The protection only works if the company agreement creates the series, the Certificate of Formation gives notice of the liability limit, and you keep separate records for each series (§101.602). A registered series needs an added filing with the Secretary of State.

Why it matters: Real estate investors use series LLCs to put each property in its own box. Failure to meet statutory requirements may jeopardize the intended liability separation.

Sample clause: The Company may establish one or more series under Texas Business Organizations Code Subchapter M. Each series will maintain separate records and assets as required by Texas law. The Company intends each series to have the separate rights, obligations, and liability protections available under applicable law, subject to the statutory requirements and limitations.

What Can't a Texas Operating Agreement Change?

You can write almost any rule you want. But §101.054 lists a few things your agreement cannot waive or change. In plain words, your agreement cannot:

• Unreasonably restrict a member’s right to look at company records

• Allow a distribution when the LLC’s liabilities would exceed the value of its assets

• Skip the state’s formal winding-up and termination process (the vote that starts it can change)

• Waive the rule that contribution promises must be in a signed writing

• Change state rules for filings, names, and registered agents

Texas law gives LLC owners flexibility to set their own rules, but that flexibility has limits. Section 101.054 identifies statutory provisions that generally cannot be waived or modified, subject to specific exceptions. Other laws may also limit what an operating agreement can require.

How to amend a Texas LLC operating agreement

You will need to change your agreement at some point. A member leaves. You add a partner. You switch to manager-managed. Here is how it works in Texas.

Texas rule: Every member must consent to an amendment by default (§101.053). Your agreement can set a lower vote, such as a simple majority or supermajority.

Steps:

1. Check your agreement for the amendment rule. Follow the vote it requires.
2. Hold the vote. Record it in writing. A signed written consent works instead of a meeting (§101.358).
3. Write the amendment. State the section being changed and the new language. Date it.
4. Have every required member sign.
5. Attach the amendment to the original agreement. Give each member a copy.
6. Update Schedule A if ownership changed.

Sample amendment clause: This Agreement may be amended only by a written document signed by Members holding supermajority vote. Any amendment that changes a Member's Membership Interest or capital contribution requires that Member's signature.

Ready to Put Your Texas LLC Agreement in Writing?

Texas does not require an operating agreement, but writing one lets you set your own rules instead of relying on the state’s defaults. Swyft Filings helps you create your Texas operating agreement online. Swyft Forms is free for the first 7 days, then a subscription applies. Start your free trial now.