Business
What an operating agreement covers
Updated March 17, 2026
In Texas, an LLC's operating agreement is called a company agreement. It's the rulebook for the company: who owns what, who decides what, how money is shared, and what happens when an owner wants out. Texas doesn't require an LLC to have a written company agreement, but without one, the default rules in the Texas Business Organizations Code apply, and they may not match what the owners intended.
Single-member LLCs need one too
A single-member company agreement helps show that the company is separate from its owner, which supports liability protection. It can say who manages the company if the owner dies or becomes incapacitated, and banks often ask for one when you open an account.
What a company agreement covers
Ownership and capital
The agreement lists the members, their ownership percentages or units, and what each contributed, whether money, property, or services. It says whether members must contribute more later, what happens if a member doesn't, and how loans from members are treated.
Management and voting
The agreement states whether the company is managed by its members or by managers. It identifies which decisions need a simple majority and which need unanimous or supermajority approval, such as selling the business, admitting a new member, or borrowing large sums. A good agreement also explains how to break a deadlock.
Profits, losses, and distributions
The agreement explains how profits and losses are allocated and when cash is distributed. Many multi-member agreements include tax distributions, which help members pay income tax on company profits they're taxed on but haven't received in cash. Your CPA should review the tax provisions.
Duties and outside activities
Texas allows a company agreement to expand or restrict, within limits, the duties that members and managers owe. The agreement can also address whether members may run other businesses, including competing ones.
Transfers and new members
Most agreements restrict selling or transferring an ownership interest. They often give the company or the other members a right of first refusal and require approval before anyone new becomes a member.
Buyouts and departures
Buy-sell provisions answer hard questions in advance. What happens if a member dies, becomes disabled, divorces, retires, stops working in the business, or files for bankruptcy? How is the interest valued: by an agreed annual value, an appraisal, or a formula? How is the buyout paid, over what period, and is it funded by life insurance? Because Texas is a community property state, a divorce can give a member's former spouse a claim to part of an ownership interest, which is one reason these provisions matter.
Dissolution and winding up
The agreement sets out the events that end the company and the order in which assets are distributed, with creditors paid before members.
Disputes and records
Many agreements require mediation or arbitration before a lawsuit, and they explain how records are kept and what information members can see.
Texas default rules can surprise owners
When an agreement is silent, Texas default rules fill the gaps. For example, someone who acquires a member's interest, such as a creditor or a former spouse, generally receives only that interest's share of distributions and doesn't become a member with voting rights. Owners who want different results should address these situations in writing.
Who we represent
In a multi-member company, the owners' interests can differ. Our engagement letter explains whether we represent the company or a particular member, and any owner may want independent counsel to review the agreement.
Cost and timing
| Company agreement | Fee | First draft |
|---|---|---|
| Single-member | $650, including one round of revisions | 5 business days |
| Multi-member, up to 4 members, standard terms | $1,800, including two rounds of revisions | 10 business days |
| Complex: 5 or more members, investor terms, or custom distributions | From $3,000, quoted after scoping | Quoted with the fee |
Formation bundles save $150 for a single-member LLC ($1,450 total) and $250 for a multi-member LLC ($2,800 total). See our business fee schedule.
This is general information, not legal advice.