Texas LLC Operating Agreement

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How to complete your Texas LLC Operating Agreement

LLC Operating Agreement (template + instructions)

What is a Texas LLC Operating Agreement?

A Texas LLC Operating Agreement is a written contract among the LLC Members (owners) which includes details and information about LLC ownership and management.

Basic Information

Your Operating Agreement will include basic information about your Texas LLC. A lot of the information will be the same information listed in your LLC’s Certificate of Formation, such as:

LLC Ownership

Your Texas LLC Operating Agreement will be a place where all the LLC Members will list how much of the LLC they own and then each Member will sign the Operating Agreement.

How much someone owns is called their “ownership interest”, “ownership percentage”, or “ownership units”. LLC Ownership is most often expressed as a percentage (example, 5%, 50%, 100%, etc.). The terms “shares” or “shareholders” doesn’t apply to LLCs.

Initial Capital Contribution

One of the first things you’ll do after your LLC filing is approved by the Texas Secretary of State is have each of the LLC Members (or the sole Member in a Single-Member LLC) make their initial capital contribution. The initial capital contributions will be listed in your Texas LLC Operating Agreement.

A capital contribution is simply an individual member depositing money into the LLC bank account. The most common way to do this is by each person writing a personal check made out to the LLC. This also creates a nice record of the transaction. If you’re going to use an Operating Agreement template provided below, you’ll want the amount of the initial capital contribution to be proportionate to the ownership percentages.

For example, if it’s a 2-Member LLC with 50/50 ownership, each person should deposit the same amount of money. It doesn’t matter if both Members deposit $500 or $25,000; as long as both amounts are the same. If the 2-Member LLC was owned 70/30, then the deposits should reflect that ratio, such as Member 1 depositing $7,000 and Member 2 depositing $3,000.

Distribution of Profits

As per the Operating Agreement templates below, when Members take money out of the Texas LLC bank account and distribute profits to themselves, this is called a “capital distribution”.

A capital distribution can be taken by an LLC Member writing a check from the LLC bank account to the LLC Member(s) individually. You could also use a digital bank transfer, bank wire, or any other other means of money transfer that creates a documented record.

In a Multi-Member Texas LLC, the amount of the capital distributions are proportionate to the percentage of LLC ownership.

Note: A capital distribution is not considered a salary.

Statement about taxes

A brief statement about how the LLC will be taxed will be made in the Texas LLC’s Operating Agreement.

Membership Voting

The rules of membership voting will be spelled out in your Texas LLC’s Operating Agreement. If you use the template for a Member-Managed LLC below, the voting powers are proportionate to the LLC ownership percentages.

If you use the Manager-Managed Operating Agreement template below, the voting powers are also proportionate to the LLC ownership percentages. Then the Members (by a majority vote) agree to elect a Manager. The Manager then has their own authority to make most decisions on behalf of the LLC (without a vote needed by the Members). However, certain things, like adding a new LLC Member require a vote of the existing Members (and the Manager has no say).

What about Single-Member LLCs?

Operating Agreements are not only for Multi-Member LLCs.

Even if you are the only Member of your Texas LLC (a Single-Member LLC), it’s still best practice to have an Operating Agreement.

If you have to go to court, having an Operating Agreement will help prove your Single-Member LLC is being run as a separate entity. And therefore, your personal assets remain safe and out of reach of creditors.

Do I have to send my Texas LLC Operating Agreement to the state?

No, you don’t have to send your Texas LLC Operating Agreement to the Texas Secretary of State (or to any other government agency for that matter).

As an “internal document“, you (and your fellow Members, if applicable) need only keep your Texas LLC Operating Agreement in your business records and amongst yourselves.

Who needs your Operating Agreement?

The following may need to see a copy of your Texas LLC Operating Agreement:

  • Banks and lending companies
  • Title companies
  • Accountants, tax professionals, and lawyers
  • Investors
  • Court (if you ever end up there)

This list is not exhaustive. Other individuals and companies may also request a copy of your Texas LLC’s Operating Agreement.

Operating Agreements don’t need to be notarized

Your Texas LLC Operating Agreement doesn’t need to be notarized.

Once you (and the other LLC Members, if applicable) sign the Operating Agreement, then it becomes a legally binding document for all of you.

Texas LLC Operating Agreement (Member-managed)

Our Texas LLC Member-managed Operating Agreement is available in 3 formats:

A Member-managed Texas LLC is where all the owners (LLC Members) have the ability to bind the LLC in contracts and agreements. And the Texas LLC Members also run the business and the day-to-day operations.

Texas LLC Operating Agreement (Manager-managed)

If your Texas LLC will be Manager-managed, you can download the Operating Agreement below.

Their Texas LLC Manager-managed Operating Agreement is available in 2 formats:

A Manager-managed Texas LLC is where only one, or a few designated people (called “Managers”), have the ability to bind the LLC in contracts and agreements. The Texas LLC Managers also run the business and the day-to-day operations, while the other Members can’t bind the LLC in contracts and agreements, and they don’t take part in running the business and day-to-day operations. Instead, they take a passive/investor role. The Members however do vote the Manager into their position and also are required to vote on certain items, like adding or removing an LLC Member.

Tip: Most Texas LLCs are Member-managed. To learn more, please see Member-managed LLC vs Manager-managed LLC.

Customized Texas LLC Operating Agreement

If you want your Texas LLC’s Operating Agreement customized to you and the other LLC Members’ specifications, we recommend hiring a business attorney.

Make sure all LLC Members have a copy

Once you finalize your Texas LLC’s Operating Agreement, make sure all Members have a copy.

And keep a copy or two of the Operating Agreement with your business records.

Next Step: EIN Number from IRS

After you’ve completed and signed your Texas LLC’s Operating Agreement, you can then proceed to the next Lesson: Texas LLC EIN Number.

Matt Horwitz


Matt Horwitz
Founder & Educator, LLC University®
Matt Horwitz has been the leading expert on LLC education for the past decade. He founded LLC University in 2010 after realizing people needed simple and actionable instructions to start an LLC that other companies weren't offering. He's cited by Entrepreneur Magazine, Yahoo Finance, and the US Chamber of Commerce, and was featured by CNBC and InventRight.
 
Matt holds a Bachelor's Degree in business from Drexel University with a concentration in business law. He performs extensive research and analysis to convert state laws into simple instructions anyone can follow to form their LLC - all for free! Read more about Matt Horwitz and LLC University.

17 comments on “Texas Operating Agreement”

Disclaimer: Nothing on this page shall be interpreted as legal or tax advice. Rules and regulations vary by location. They also change over time and are specific to your situation. Furthermore, this comment section is provided so people can share their thoughts and experience. Please consult a licensed professional if you have legal or tax questions.

  1. Can you add a section for those who want to transfer the business to someone else? I’m a SMLLC and if I die, the state of Texas will get the LLC. I want to transfer it to someone else for them to run.

    • Hi Jared, I’m not sure where you were reading that, but it’s not correct. The state of Texas does not take over your LLC upon your passing. Your LLC interest will go to whoever is listed in your will or your next of kin (wife or kids, for example). I recommend working with a Texas attorney after your LLC is formed for any custom provisions you’d like to add to your Operating Agreement. We will also look at improving ours. Thank you for your comment and I hope I’ve been helpful.

  2. Matt,

    I can’t thank you enough for lending your expertise and providing this free and easy operating agreement.

    I hope that one day our paths cross so that I might repay your generosity.

    All the best,
    Jeff Wilson

    • Jeff, thanks so much for your awesome comment! Just pass along our website name the next time you bump into someone forming an LLC ;-)

  3. I’ve been searching everywhere for months for something like this, and your explanation of LLC formation is by far the most comprehensive and clear. Thanks so much for taking the time to spell this out for otherwise overwhelmed aspiring entrepreneurs!

    Also, I’m planning to start a single-member content marketing consultancy, and don’t anticipate running into litigious risks.

    Still, I’d like to cover my bases and I read that in case of a charging order, (for LLCs doing business in other states besides their base/incorporated state), it may be a good idea to give a small percentage to a trusted individual.

    Do you know if that’s true?
    Or is it easier to add that the LLC will not make distributions in event of a charging order?
    If so, should this part go into the Operating Agreement?

    Thanks so much for imparting all your knowledge, these videos have taken a load of stress off me!

    • Hi Erica, great to hear! Thank you for the kind words and glad to hear our information has been helpful :) We haven’t published information on charging order protection yet, but we will soon. If you’d like the extra protection, you can form a parent LLC in Wyoming, then have your 2nd LLC owned by the Wyoming LLC. Which state would the child LLC be located in? If Texas, then in your Certificate of Formation, under Article 3 Governing Authority, you’d check off “B” and list your Wyoming LLC as the Governing Person 1 (don’t list your name anywhere in the Article 3). Then you’d also list your Wyoming LLC as the 100% Member in your Texas LLC’s Operating Agreement. That would connect the LLCs and make it a parent-child relationship. When signing for the Wyoming LLC, you’d sign your actual signature, but under your signature, make sure to properly designate who you are signing for. So you’d write “Wyoming Business Name, LLC, by Sally Jones, Member”). Hope that helps.

  4. Do you have any info on series llcs set up in Texas?

  5. 2 Questions

    1) how do I add partners as managing members? Do I need to file anything with the Texas Secretary of State?

    2) in the operating agreement, does profit sharing have to match ownership shares? With 3 partners, 2 are more active in day-to-day and the other is more a silent partner. Can 2 of us take the first X amount of profit to cover our living expenses and everything thing after that amount is shared by 1/3?

    • Hi Chad, while you don’t have to amend your Certificate of Formation, you certainly can, and some places like banks may want to see a member/manager there if they are going to be added to the LLC’s bank account. However, it’s the Operating Agreement where this is done. You can amend your Operating Agreement or create a new one. If the adding/removing of members changes your tax classification, you’ll also need to update the IRS. And no, share of profits doesn’t have to match ownership percentages. Hope that helps.

  6. In a member-managed LLC where the two members are husband and wife (and are a joint qualified venture), I’ve seen elsewhere on this site that the “members” should be on one line as “jack and jill doe”. Should this be the same on the signatures of the operating agreement (i.e. same line) or on separate lines? Thank you for all this info!!

    • Hi Amanda, you are correct. In a husband and wife LLC that is taxed as a Qualified Joint Venture LLC, the husband and wife will own the LLC as “one unit”. So instead of the Operating Agreement showing the LLC Members as “Jack Doe, 50% ownership” and “Jill Doe, 50%” ownership (note, 50/50 isn’t required is this example… it can be divided in any manner), it’ll be “Jack and Jill Doe, 100% ownership”. For the signatures, both people can sign on separate lines. Hope that helps!

  7. Hello Matt. I recently filed for my brand new companies LLC and I am partnering with a friend of mine, I accidentally only put him as a Managing Member thinking since it’s my company, I did not need to add myself also but apparently that is wrong. So now I have an LLC that shows me as the registering agent pretty much and my friend as the Managing Member. How do I add myself in as a managing member also? Do I just fill out an operating agreement and put both of our names in? Bank would not allow me to open up account since he’s the only one showing as managing member. Newbie mess up on my end.

    • Hi John, based on what you said, it sounds like in the Texas Certificate of Formation (the document that creates the LLC), your partner is the only person listed in the “Governing Authority” section. If that’s the case, you’ll need to file a Certificate of Amendment (Form 424) and pay the $150 filing fee in order to amend the Governing Authority section. Then you can amend the Operating Agreement or create a new one with you and he listed as the LLC Members. Hope that helps.

  8. Once you have completed the Operating Agreement, does it have to be notorized to be valid? Do you have to file it through the SoS? What is the next step once you have completed all of the essential information?

    • Hi Chambers, no, the LLC Operating Agreement is an internal document. It doesn’t get sent to the state. It’s a private document for the LLC Member(s). The Operating Agreement doesn’t need to be notarized. If you are following our Texas LLC course, please follow the “detailed lessons” at the top of the page. The next step is the EIN Number. Hope that helps.

  9. This site is fantastic. Thanks for putting it together.

    The sample Operating Agreement for Texas allows for assignment of financial interest without impacting the voting rights. Do you have a sample form for this Assignment of Interest? Would this need to be filed with the state of Texas if/when it is created?

    • Hi Randall, thank you! You’re very welcome. We don’t have an Assignment of LLC Membership Interest form at this time. No, it wouldn’t need to be filed with the state. However, you’d file an Amendment to add/remove a Governing Person though. Hope that helps.

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