What Should a Texas LLC Company Agreement Include?

Filing a certificate of formation creates your Texas LLC. The company agreement is what makes it work. It is the private contract among the owners that answers the hard questions before they come up. For Tyler businesses with more than one owner, it is the single most important document the company will have.

Ownership and Capital Contributions

Spell out who owns what percentage, what each member put in (cash, property or services), and whether anyone must contribute more money later. Vague contribution terms are one of the most common sources of fights between owners.

Management and Voting

Decide whether the company is managed by all members or by designated managers, and which decisions require a simple majority, a supermajority or unanimous consent. Selling the business, taking on large debt and admitting a new member are usually worth protecting with a higher vote.

Distributions and Taxes

Set out when profits are paid out and in what proportion. Many agreements require tax distributions so members have cash to pay the taxes on income the LLC passes through to them.

Transfers, Buyouts and Exits

This is where most homemade agreements fall short. Address what happens when a member wants to leave, dies, becomes disabled, divorces or is forced out. Include rights of first refusal, a method for valuing an ownership interest, and payment terms for a buyout. Our article on business succession planning covers this in more depth.

Duties and Dispute Resolution

Texas lets LLCs adjust certain duties members owe each other. You can also require mediation before anyone files a lawsuit, which can save time and money if disagreements arise.

Frequently Asked Questions

Is a company agreement required for a Texas LLC?

Texas does not require you to file one with the state, but without it, default statutory rules govern your company. Those rules often do not match what the owners intended.

Can we change our company agreement later?

Yes. Most agreements explain how they can be amended, usually by a specified vote of the members. Changes should be put in writing and signed.

Talk With a Tyler Attorney

Need a company agreement drafted or reviewed? See our business formation services. Call Lindsey Birdsong, PC at (903) 595‑6297 or visit our contact page. Our office is at 2307 Dueling Oaks Drive, Suite 103, in Tyler.

This article is general information, not legal advice. Talk with an attorney about your specific situation.