Every Texas LLC should have an operating agreement in place.
While not legally required by the state, having a written operating agreement will set clear rules for your company’s procedures and for the management and operations of your LLC.
Download our free Texas operating agreement template below or sign up to create a custom operating agreement using our free tool.
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Free Texas LLC Operating Agreement Templates
We offer operating agreement templates for single-member LLCs and multi-member LLCs (including member-managed and manager-managed) as well as a customizable operating agreement tool.
You can create customized LLC operating agreements in minutes.
Single-Member LLC Operating Agreement
Our single-member LLC operating agreement template was created for limited liability companies with only one member, where the sole member has full control over all affairs of the LLC and no other individuals have a membership interest in the company.
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Multi-Member LLC Operating Agreements
Our multi-member LLC templates are meant for LLCs with more than one member. There are two types available: manager-managed and member-managed.
Create Custom Operating Agreement
Create a custom operating agreement using our free tool. Just answer a few basic questions, and the tool will develop an operating agreement for your new LLC.
To use our tool, you will need to sign in to our Business Center. A Business Center account will also grant you access to many other free tools, special discounts on business services, and much more.
What Is a Texas LLC Operating Agreement?
An operating agreement is a legal document that outlines the ownership structure and operating procedures of an LLC.
Whether you are starting a single-member or multi-member LLC, your operating agreement should address all of the topics below. Some of these stipulations will not have much bearing on the actual operations of a single-member LLC, but are still important to include for the sake of legal formality.
- Organization: When the LLC was officially formed, who its members are, and how ownership is divided. Multi-member LLCs may utilize an equal ownership structure or assign various members different “units” of ownership.
- Management & Voting: Whether the LLC will be managed by its members or by an appointed manager, and how members will go about voting on business matters. Typically, each member has one vote, but you may wish to give some members more voting power than others. For more information on managing your LLC, read our Member-Managed vs Manager-Managed guide.
- Capital Contributions: The amount of money each member has invested in the business. This is also where you should establish an approach to raising additional funds in the future.
- Distributions: How profits and losses will be divided among the members. The most common option is to distribute profits evenly. If you want them divided a different way, this should be detailed in your operating agreement. For more information on the basics of LLC ownership, read our Contributions and Distributions guide.
- Changes to Membership Structure: How roles and ownership will be transferred in the event that a member leaves the company. It’s essential to lay out the process for buying out and/or replacing a member in the LLC’s governing document.
- Dissolution: Dissolution: If at some point all the members of your LLC decide you no longer wish to conduct business, you should officially dissolve it. Outlining the hypothetical process of dissolving your business is an important aspect of your operating agreement. To learn how to dissolve your Texas LLC, read our Texas LLC Dissolution article.
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Why Should I Have a Texas LLC Operating Agreement?
No matter what type of Texas LLC you're starting, you'll want to create an operating agreement. Here's why:
It’s recommended by the state. According to Texas Business Organization Code § 101.052, all members of a Texas LLC may enter into an operating agreement (or “organizing agreement”) to regulate the internal affairs of the company.
- It'll prevent conflict among your business partners. If you're starting a multi-member LLC, having an operating agreement will prevent misunderstandings amongst your team by setting clear expectations about each partner's role and responsibilities.
- It helps preserve your limited liability status. If you're the sole owner of a single-member LLC in Texas, having an operating agreement will help to ensure your limited liability status is upheld by court officials, and add to your business' credibility as a whole.
The full text of the statute can be found below:
(a) Except as provided by Section 101.054, the company agreement of a limited liability company governs:
(1) the relations among members, managers, and officers of the company, assignees of membership interests in the company, and the company itself; and
(2) other internal affairs of the company.
(b) To the extent that the company agreement of a limited liability company does not otherwise provide, this title and the provisions of Title 1 applicable to a limited liability company govern the internal affairs of the company.
(c) Except as provided by Section 101.054, a provision of this title or Title 1 that is applicable to a limited liability company may be waived or modified in the company agreement of a limited liability company.
(d) The company agreement may contain any provisions for the regulation and management of the affairs of the limited liability company not inconsistent with law.
(e) A company agreement may provide rights to any person, including a person who is not a party to the company agreement, to the extent provided by the company agreement.
(f) A company agreement is enforceable by or against the limited liability company, regardless of whether the company has signed or otherwise expressly adopted the agreement.
How to Form an LLC in Texas
Follow these six crucial steps to establish a limited liability company in Texas:
- Pick a Unique LLC Name. The name you choose for your LLC must be distinguishable from existing business names within Texas and comply with the state's naming conventions.
- Appoint a Registered Agent. Designate a registered agent who can accept legal paperwork on your LLC's behalf. This agent can either be an individual or a professional service. We often recommend a service, as the first year of registered agent services usually comes free with LLC formation.
- File the Certificate of Formation. You are required to submit the Certificate of Formation with the Texas Secretary of State, and pay the state filing fee, to officially create your LLC.
- Obtain an Employer Identification Number (EIN). You'll need an EIN to open a business bank account and to hire employees. These are available free of charge from the Internal Revenue Service (IRS).
- Draft an Operating Agreement. An Operating Agreement details your LLC's ownership structure / management structure, profit distribution, and operational procedures. Use our free tool to help create a free written operating agreement.
- Register for State Taxes. Lastly, depending on your business operations, you may need to register for certain state-level taxes. Check with the Texas Comptroller of Public Accounts for specific requirements to help you maintain a lawful business.
After Creating Your Texas LLC Operating Agreement
Once you have finished your Texas LLC operating agreement, you do not need to file it with your state. Keep it for your records and give copies to the members of your LLC.
Following any major company event, such as adding or losing a member, it is a good idea to review and consider updating the operating agreement. Depending on how your operating agreement is written, it may require some or all of the members to approve an amendment to the document.
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Frequently Asked Questions
Is an operating agreement required in Texas?
An operating agreement is not required in Texas. It can and should serve as an internal document for LLC owners to help maintain smooth operations. You can get a free custom operating agreement through our Free LLC Legal Forms page.
When should I create my operating agreement?
While it's a good idea to create an operating agreement before filing your Certificate of Formation, the state does not discourage LLCs from waiting until the formation process is complete. It's worth noting that some banks require you to submit an operating agreement in order to open a business bank account.
Do I need to file my operating agreement with the state?
No. Operating agreements are to be retained by the LLC members. There is no need to file your operating agreement with the Texas Secretary of State.
Do I need a special operating agreement for a foreign LLC?
When creating a foreign limited liability company, you may need to update your operating agreement to comply with the laws of both your home state and the state where you're forming the LLC. This includes reflecting changes in management, ownership, and other relevant details. It's important to ensure your operating agreement accurately represents how your LLC operates.
Can I make my own operating agreement?
Yes, in the state of Texas, you have the option to create your own operating agreement for your LLC without hiring an attorney. Utilizing an LLC operating agreement template simplifies the process while ensuring that you cover important elements necessary to meet legal requirements.