Search for an LLC operating agreement for Texas and you'll find a wall of free templates. Here's what most of them never mention: the Texas Business Organizations Code doesn't use the phrase "operating agreement" at all. It calls the document a company agreement. And it has a lot to say about what happens when yours is missing, thin, or silent on the one question that just became urgent.
That last part is the real story. Texas doesn't leave an LLC without rules when the owners never write any. It hands them a default set, and a few of those defaults explain why partners who started on a handshake can end up with no clean way to separate.
Why Texas Calls It a "Company Agreement"
Section 101.001 of the Business Organizations Code defines a company agreement as any agreement of the members, "written, implied, or oral," about the company's business. Read that again. An informal understanding over breakfast tacos can count. So can the way you've always split the money. The same section says a one-member LLC's agreement isn't unenforceable just because only one person is a party to it.
Plenty of Texas LLCs keep a document titled "Operating Agreement," and the name on the cover doesn't change what it is. What changes things is the content. Under Section 101.052, the company agreement governs the relationships among the members, managers, and the company itself, and every member and manager is bound by it whether or not they signed. Where the agreement says nothing, the statute speaks instead.
You also won't find it on file with the state. The Certificate of Formation goes to the Secretary of State with a $300 filing fee, but the company agreement stays with the company. The Secretary of State's FAQ says no statute permits filing internal governing documents, so it can't accept them.
What Texas Does When Your Agreement Is Silent
These Chapter 101 defaults do the most damage in a multi-member LLC, because owners usually assume the opposite.
- Management follows your formation filing. If the agreement doesn't say who runs the company, Section 101.251 looks at the Certificate of Formation. If it lists managers, managers run it. If it doesn't, the members do.
- One member, one vote. Section 101.354 gives each member an equal vote. A 90% owner and a 10% owner cast the same single vote. Ordinary decisions pass by a majority of those present at a meeting with a quorum, which Section 101.353 sets at a majority of all members.
- Money follows the recorded contribution. Sections 101.201 and 101.203 split profits, losses, and distributions by the agreed value of each member's contribution as stated in the company's records. The partner who brought the recipes, the code, or the client list instead of cash can get shortchanged by that formula if nobody ever wrote down what the work was worth.
- No right to a payout. Under Section 101.204, a member can't demand a distribution until the company's governing authority declares one.
- No exit door. Section 101.107 is one sentence long: a member may not withdraw or be expelled. A member is paid the fair value of their interest on withdrawal only if the company agreement grants a right to withdraw in the first place (Section 101.205).
- A buyer gets money, not a seat. A member can assign their interest, but Section 101.108 says the assignee doesn't become a member or get any say in management. Section 101.109 lets an assignee become a member only with the approval of every member.
- Changing the deal takes everyone. Amending the company agreement requires the consent of each member (Section 101.053). Issuing new membership interests after formation needs all members' approval too (Section 101.105).
Put those together and you can see the trap. Two equal partners disagree. Neither can leave with their money or push the other out, each has one vote, and the agreement can't be fixed without the consent of the person you're fighting with.
The Clauses a Multi-Member Austin LLC Actually Needs
A good company agreement swaps the defaults that don't fit for terms you chose on purpose. These are the clauses that matter once the company has real value.
Management and authority. Decide whether the LLC is member-managed or manager-managed, whether votes are counted per person or by ownership percentage, and which decisions need more than a simple majority: taking on debt above a set amount, signing a long commercial lease, selling the business. Authority limits help, but only internally. Under Section 101.254, a member or manager acting in the ordinary course of business binds the company unless they lacked actual authority and the other side knew it. An internal spending cap won't undo a contract with a vendor who never heard of it.
Capital calls. Sooner or later the business needs more money than it has. Who decides that, how much does each member owe, and what happens to the member who can't pay? Common answers are treating another member's coverage as a loan or adjusting ownership. Pick one before it's needed.
Distributions and tax distributions. Because no member can force a distribution, the agreement should set when cash goes out and in what order. If the LLC is taxed as a partnership, members can owe income tax on their share of profit even in a year when the company keeps every dollar. A tax distribution clause, which sends members enough cash to cover that bill, is standard for that reason. The right formula depends on your tax picture, so build it with your CPA.
Buy-sell triggers: death, disability, divorce, departure. Texas already speaks to two of these. Under Section 101.1115, a deceased member's heirs and a divorced member's former spouse hold their shares as assignees, with a right to distributions but no vote. A membership interest can be community property, though the right to manage the business isn't (Section 101.106). The statute also preserves any agreement to buy or sell an interest on death or divorce. Chapter 101 says nothing about a member's disability, and departure runs straight into the no-withdrawal rule: a co-founder who quits working still owns their share. Your agreement should name each trigger and say who has the right, or the obligation, to buy.
Valuation and payment. A buy-sell clause is only as good as its price mechanism: a fixed price the members update yearly, a formula tied to earnings, or an independent appraisal. Spell out payment terms too. A surviving partner who owes an estate a lump sum may not have it, which is why some LLCs fund buyouts with life insurance.
Deadlock. Any 50/50 LLC under the per-person voting default is one disagreement away from a standstill. Deadlock provisions can require mediation first, give a tie-breaking vote to a trusted outside party, or let one member name a price at which the other must either buy or sell. When none of these exist, the conflict tends to end up as a partnership dispute.
Non-compete and IP assignment. If a member walks away, can they open the same business down the street, and who owns the brand, software, or customer list they helped build? Texas enforces a non-compete only if it's part of an otherwise enforceable agreement and its limits on time, geography, and scope are reasonable, under Business and Commerce Code §15.50. (Our non-compete post goes deeper.) Pair it with an IP assignment so the company owns what the company paid to create.
Duties between members. Section 101.401 lets a company agreement expand, restrict, or even eliminate fiduciary duties. If a draft from your partner's side quietly narrows those duties, read that part slowly.
Amendment. Unanimous consent is the default. Many LLCs switch to a supermajority so one small holder can't block every change, while keeping each member's economic rights off-limits without that member's consent.
Single-Member LLCs: Why One Owner Still Needs One
It's tempting to think a one-person LLC has nobody to agree with. Texas law disagrees.
Succession. If the only member dies, the heirs hold the interest as assignees, not members. Under Section 11.056, losing the last remaining member is an event requiring the company to wind up unless, within one year or the period the agreement sets, the member's legal representative or successor agrees to continue the company and become a member. The company agreement can name that person ahead of time and obligate them to step in.
Separateness. Texas is protective here already. Section 21.223, which Section 101.002 applies to LLCs, says a member can't be held liable for the company's contract obligations just because the company skipped formalities, and reaching a member on a contract debt generally takes proof of actual fraud for the member's direct personal benefit. That rule covers contract debts, not every kind of claim, and a written agreement is still the cleanest record that the business is separate from you.
Banks and partners. Many banks ask to see an operating agreement before opening a business account, mostly to confirm who can sign.
Template or Drafted Agreement?
For two or more owners, the risk with a template isn't bad language. It's that it answers questions nobody at the table discussed. Still choosing a structure? Our post on LLC vs. corporation for Austin startups covers that decision, and our business formation page walks through the other Texas entity options.
Common Questions
Is an LLC operating agreement required in Texas? Texas doesn't make you file one, and the Secretary of State won't accept one for filing. The Business Organizations Code calls the document a company agreement and recognizes agreements that are written, implied, or oral. So there's no signed-document requirement to satisfy. But if you don't write one, the default rules in Chapter 101 of the Code decide voting, distributions, transfers, and exits for you.
Can a member be kicked out of a Texas LLC? Not under the default rules. Section 101.107 of the Business Organizations Code says a member may not withdraw or be expelled. If the owners want a way to remove a partner, or a way for a partner to leave and get paid, the company agreement has to create it.
What happens to my LLC interest if I get divorced in Texas? A membership interest can be community property. After a divorce, your former spouse holds their share of the interest as an assignee, which carries a right to distributions but not to vote or manage. The statute keeps buy-sell agreements enforceable on divorce, so a company agreement can give the company or the other members the right to buy that share back.
Does a single-member LLC in Texas need a company agreement? It's worth having one. Texas says a one-member company agreement is enforceable, and many banks ask for one before opening a business account. The bigger reason is succession: if the only member dies, the heirs hold the interest as assignees, and the company has one year (or whatever period the agreement sets) for a successor to agree to continue it. The agreement can name that successor ahead of time.
We connect Austin business owners with attorneys in our network who draft company agreements for the business you actually have, and who can review the one you signed years ago. See how LLC formation works in Austin, read about partnership disputes if things have already gone sideways, or connect with an Austin business attorney to talk through your agreement.
Disclaimer: This article provides general legal information for educational purposes only. It does not constitute legal advice, and ATX Attorneys is not a law firm. Tax treatment depends on your specific situation; consult a CPA. Consult a licensed Texas business attorney about your particular company agreement.