LLC Operating Agreement Texas: Everything You Need to Know
If you are forming a limited liability company, or “LLC,” in Texas, one of the things you will need to do is create an LLC operating agreement. 3 min read
2. How to Form an LLC in Texas
3. What to Include in an LLC Operating Agreement in Texas
4. How to Write an LLC Operating Agreement in Texas
LLC Operating Agreement in Texas
If you are forming a limited liability company, or “LLC,” in Texas, one of the things you will need to do is create an LLC operating agreement. An operating agreement is a legal document that essentially lays out the rules and procedures of the LLC. Texas will treat this document as governing, and it is a good idea for every LLC to have one.
How to Form an LLC in Texas
Taking a step back for a moment, before you create an operating agreement, you must first form your LLC. There are some basic steps that every entrepreneur must follow if they wish to establish their business as an LLC in Texas.
File Articles of Organization in Texas. This document establishes your business in the state. You must file the correct forms depending on what type of LLC you want to form. There are two types of LLCs: (1) domestic; and (2) foreign. A domestic LLC means that you will be forming the company in Texas. A foreign LLC means that you have previously filed your LLC in a different state.
Register an Agent. A registered agent can be an individual or a business, so long as the individual or business is a resident of Texas. The registered agent can be someone within the LLC.
Register your LLC.
Pay the Initial Startup Fees. Texas will charge an initial filing fee of $300 for domestic LLCs and $750 for foreign LLCs.
Create an Operating Agreement.
Obtain an Employer Identification Number for tax purposes.
What to Include in an LLC Operating Agreement in Texas
The law governing operating agreements in Texas can be found in Title 3, Chapter 101 of the Texas Business Organizations Code. Note, that while an operating agreement is not required under Texas law to operate your business, it is highly advised that an LLC create one anyway. It offers the LLC members a form of protection since it explicitly sets out the roles of the members and the LLC’s rules and policies.
The LLC’s operating agreement should first and foremost, describe the purpose of the business and some basic information about where the business is located, the LLC’s contact information, etc. It should also describe the roles of each of the LLC’s members. This includes how the members will contribute to funding and what their daily responsibilities are. If the LLC has multiple owners, you can also include how much of the LLC each person owns.
The LLC also sets forth the rules regarding how an owner can exit the LLC. Because LLCs are not allowed to have shareholders, the operating agreement is the vehicle for describing how the LLC will deal with an owner leaving. For example, the LLC operating agreement can establish that if an owner leaves, the remaining owners have the option of acquiring the former owner’s percentage of the business. Or, the operating agreement can establish that the former owner must be replaced with a new owner.
How to Write an LLC Operating Agreement in Texas
If you do not wish to start drafting an operating agreement from scratch, there are free templates available on the internet. If this is what you choose, download the document and write your LLC’s name at the top. You then want to write in the date you want this operating agreement to take effect.
You must indicate in the operating agreement whether the LLC will be a single or multi-member business. If it is a single-member LLC, you must write the LLC’s name, location, and the owner’s full name and address. If it is a multi-member LLC, you must include each owner’s full name and address.
Be sure to also include the purpose of the LLC, the principal place of business, how much funds each member has contributed, the name of the registered agent, any information about new members, the annual meeting date, roles and responsibilities of each member, and ownership of company property.
Once you have completed the body of the operating agreement, each member needs to sign it for it to be valid.
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