The Ultimate Texas LLC Company Agreement Guide: Free Template & Essential Compliance
This article provides general information for educational purposes only. It is not legal advice, does not create an attorney-client relationship, and should not be relied upon as a substitute for consultation with a qualified attorney. Laws vary by state, and individualized guidance is recommended.
Filing your Certificate of Formation is a great first step, but don't break out the champagne just yet. Without a solid internal structure, your "liability shield" is more of a suggestion than a reality. You have your EIN and your business name is officially registered, but while you may have a legal entity, your personal assets are still potentially exposed to business liabilities.
Disclaimer This article provides general information for educational purposes only. It is not legal advice, does not create an attorney-client relationship, and should not be relied upon as a substitute for consultation with a qualified attorney. Laws vary by state, and individualized guidance is recommended.
Forming a Texas LLC creates the legal entity, but it does not establish how the business will operate internally.
That role belongs to the Company Agreement, commonly called an Operating Agreement. Although Texas law does not require one, nearly every LLC benefits from adopting a written agreement.
Is an Operating Agreement Required?
No.
Under the Texas Business Organizations Code, an LLC may exist without a written company agreement. However, if the members do not establish their own rules, the LLC is governed by the default provisions of Texas law.
A written agreement allows members to decide how the company will be managed rather than relying on statutory defaults.
Why Have One?
A Company Agreement helps define:
- Ownership percentages
- Voting rights
- Management authority
- Capital contributions
- Profit and loss allocations
- Admission of new members
- Member withdrawals
- Buyout procedures
- Dissolution procedures
Without a written agreement, disagreements are more likely to be resolved by applying the default provisions of the Texas Business Organizations Code.
Company Agreement vs. Operating Agreement
Texas statutes generally use the term Company Agreement, while many attorneys, banks, and business owners use Operating Agreement.
The two terms are commonly used interchangeably. Regardless of the title, the document should accurately reflect the LLC’s governance.
What Should Be Included?
A well-drafted Texas LLC agreement typically addresses:
Topic | Purpose |
|---|---|
Members | Identifies owners and ownership percentages |
Management | States whether the LLC is member-managed or manager-managed |
Capital contributions | Records each member’s investment |
Voting | Explains approval requirements |
Distributions | Describes how profits and losses are allocated |
Transfers | Limits or permits transfers of membership interests |
Buyouts | Provides procedures when a member leaves |
Dissolution | Explains how the LLC will wind up |
Members
Identifies owners and ownership percentages
Management
States whether the LLC is member-managed or manager-managed
Capital contributions
Records each member’s investment
Voting
Explains approval requirements
Distributions
Describes how profits and losses are allocated
Transfers
Limits or permits transfers of membership interests
Buyouts
Provides procedures when a member leaves
Dissolution
Explains how the LLC will wind up
The agreement should also be reviewed whenever ownership or management changes.
Will a Bank Ask for It?
Many banks request a Company or Operating Agreement before opening a business account, especially for multi-member LLCs.
Financial institutions commonly use the agreement to verify:
- Who has authority to act for the LLC
- Who may sign on bank accounts
- Ownership percentages
- The company’s management structure
Requirements vary by bank, so owners should confirm the institution’s documentation requirements before opening an account.
Texas-Specific Considerations
Community Property
Texas is a community property state.
If an LLC member is married, the agreement may address how membership interests are handled during divorce, death, or transfer. Some LLCs include spousal consent provisions to reduce future disputes.
Indemnification
Many Company Agreements include indemnification provisions protecting managers or members who act in good faith on behalf of the company.
The scope of those protections depends on the language of the agreement and applicable Texas law.
Federal Tax Matters
The agreement should identify:
- The LLC’s tax classification.
- Allocation of profits and losses.
- Fiscal year.
- Partnership Representative when required for partnership tax purposes.
Proper drafting helps ensure consistency between the LLC’s internal records and its federal tax filings.
Series LLCs
For Texas Series LLCs, the Company Agreement becomes even more important.
The agreement should:
- Establish each protected series.
- Allocate assets and liabilities separately.
- Describe management of each series.
- Require separate books and records.
Registered Series involve additional Secretary of State filings, while Protected Series rely primarily on the Certificate of Formation and Company Agreement to establish the intended liability separation.
Annual Compliance
Having a Company Agreement does not eliminate annual compliance obligations.
Texas LLCs generally must:
- Maintain a registered agent.
- File the required Public Information Report (or applicable information report).
- File any required franchise tax reports.
- Maintain accurate company records.
- Keep business and personal finances separate.
Even businesses owing no franchise tax may still have annual reporting obligations.
Best Practices
- Adopt a written Company Agreement immediately after formation.
- Update it whenever ownership changes.
- Keep signed copies with the company’s records.
- Document member approvals in writing.
- Maintain separate business finances.
- Review the agreement periodically as the business grows.
Final Takeaway
A Texas Company Agreement is one of the most valuable internal documents an LLC can have.
Although it is not required to form the company, it helps establish clear ownership rights, management authority, and procedures for handling disputes before they become expensive problems. Whether you call it a Company Agreement or an Operating Agreement, every Texas LLC should consider adopting one tailored to its business.
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