TEXAS BUSINESS LAW
Texas LLC Operating (Company) Agreements
In Texas, an LLC operating agreement is called a company agreement, and while the state does not require you to have one, operating without it is one of the most common and costly mistakes LLC owners make. The company agreement is the internal contract among the members that sets ownership, control, money, and exit rules. Without it, your LLC is governed entirely by the default gap-filling provisions of the Texas Business Organizations Code — rules you didn’t choose and may not want. This guide explains what the agreement does, what to include, and why even a single-member LLC needs one.
It’s the companion to actually forming the LLC: the certificate creates the entity; the company agreement governs how it runs.
Why It Matters Even Though It’s Not Required
The Business Organizations Code supplies default rules for anything your company agreement doesn’t address — how profits are split, how votes are counted, what happens when a member leaves. Those defaults rarely match what owners actually intend. A written company agreement lets you override them and decide for yourselves. It also does two things the statute can’t: it documents the deal among members so disputes have an answer, and it reinforces the LLC’s separateness — evidence that helps defend the liability shield against a “pierce the veil” attack.
What to Include
A solid Texas company agreement covers:
| Provision | What it sets |
|---|---|
| Ownership | Each member’s percentage interest and capital contributions |
| Management | Member-managed vs manager-managed; who has authority to act |
| Voting | What decisions need what approval threshold |
| Distributions | How and when profits and losses are allocated and paid |
| Transfers | Whether/how a member can sell or assign their interest |
| Buy-sell / exit | What happens on death, withdrawal, dispute, or deadlock |
| Dissolution | How the LLC winds down if it ends |
The transfer and buy-sell provisions are where multi-member LLCs most often wish they’d planned ahead — they decide whether a departing or deceased member’s interest can be bought out cleanly or becomes a standoff.
Single-Member LLCs Need One Too
Owners of single-member LLCs often skip the agreement, reasoning there’s no one to agree with. That misses the point. For a single-member LLC, the company agreement is key evidence that the LLC is a real, separate entity rather than the owner’s alter ego — exactly the distinction a court examines when deciding whether to pierce the veil and reach the owner personally. It also governs succession if the owner dies or becomes incapacitated, and banks and investors frequently ask to see one.
Multi-Member LLCs: Plan for the Hard Days
In a multi-member LLC, the company agreement is conflict insurance. Decide upfront how deadlocks are broken, how a member can exit, how their interest is valued, and what triggers a forced buyout. These provisions feel unnecessary when everyone gets along and become priceless when they don’t. The cost of drafting them now is trivial against the cost of litigating their absence later.
Frequently Asked Questions
Is an operating agreement required for a Texas LLC?
No. Texas law does not require an LLC to adopt a company agreement (the state’s term for an operating agreement). But without one, the LLC is governed by the default rules of the Business Organizations Code, so a written agreement is strongly recommended.
What is the difference between an operating agreement and a company agreement?
They are the same thing — “company agreement” is simply the term the Texas Business Organizations Code uses for what most states call an operating agreement: the internal governing contract among an LLC’s members.
Does a single-member LLC need a company agreement in Texas?
Yes, it’s strongly advisable. It documents the LLC as a separate entity (helping defend the liability shield), governs succession on death or incapacity, and is often requested by banks and investors — even though there are no co-members to negotiate with.
What happens if my Texas LLC has no company agreement?
The LLC is governed entirely by the default provisions of the Texas Business Organizations Code on management, voting, distributions, and member exits. Those defaults may not match the owners’ intentions and offer no custom dispute-resolution or buy-sell terms.
A company agreement is cheap insurance against expensive disputes — and it strengthens the liability protection itself. Reidel Law Firm drafts Texas LLC company agreements for single- and multi-member LLCs on flat fees. Get a Texas LLC company agreement.
