Texas LLC Operating Agreement: Do You Need One and What to Include

If you formed a Texas LLC, you may have heard that you need an operating agreement, or that you can skip one. Texas does not require a written agreement to form an LLC. But without one, the state's default rules decide how your company runs, and those defaults were written for a generic LLC, not for your business.

This guide explains what Texas calls the document, when it matters most, what the Business Organizations Code does when your agreement is silent, and what a useful agreement covers, with a focus on membership interests.

What Texas Calls It

Most states use the term operating agreement for an LLC's internal rulebook. Texas uses company agreement. Under Business Organizations Code Section 101.001, a company agreement is any agreement of the members, whether written, implied or oral.

That definition has two practical consequences. First, a written document is not the only thing that can count as a company agreement. Second, a written agreement is far easier to prove than an informal understanding. When this guide says operating agreement, it means the Texas company agreement. If your lawyer, accountant or bank uses the older phrase, they mean the same document.

Do You Need One?

Texas does not require a company agreement to form an LLC. The formation document is the Certificate of Formation (Form 205), which carries a $300 filing fee. The Secretary of State does not review your company agreement, and you do not send it with the filing.

Texas also does not require several things many owners assume are mandatory. Texas has no state general business license and no statewide general contractor or roofing license. Counties license nothing for an LLC, and the county clerk filing that applies to sole proprietors is an assumed-name matter, not a license. Texas has no state income tax and no publication requirement for a new LLC. Check the specific licenses for your trade with the state and local agencies that govern it, since the requirement comes from your activity, not from a general state license.

Not being required is different from not needing one. A written company agreement is strongly advisable in three situations:

• More than one owner. Without a written agreement, voting, profit splits, capital contributions and exit terms fall to the statutory defaults. Those defaults rarely match what the owners believe they agreed to.
• A single owner. A single-member LLC's company agreement is enforceable. A written document shows that the company operates as its own entity, which helps if anyone later questions that separation between you and the business.
• Banks, lenders and partners. Financial institutions and other parties frequently ask for a company agreement when you open accounts, apply for financing or bring in an investor. Ask your institution what it requires before you need the document.

What Happens When the Agreement Is Silent

The company agreement governs the company's internal affairs. Where it says nothing, the Business Organizations Code supplies the rule (Section 101.052). A short agreement is not a blank one. The statute fills each gap with a default term that applies to every Texas LLC.

Most of those defaults can be changed in your agreement. Section 101.054 lists the exceptions, which are provisions you cannot override by agreement. Three examples from that list:

• The requirement that an LLC have members (Section 101.101)
• The restrictions on prohibited distributions (Section 101.206)
• The requirement to keep supplemental records (Section 101.501)

Read the list before you draft. A clause that tries to eliminate a non-waivable rule will not do what it says. Have your attorney confirm which of your planned provisions fall on that list.

Membership Interests: The Part Most Agreements Get Wrong

A membership interest is an owner's ownership stake in the LLC. It bundles economic rights, such as a share of profits and distributions, with governance rights, such as voting and access to information. The company agreement is where you decide how those rights are divided, transferred and ended.

Many small LLCs describe ownership in one sentence, such as 60 percent and 40 percent, and stop there. That leaves the questions that come up later unanswered. A solid membership interest section addresses at least the following:

• Ownership percentages and records. State the percentage each member holds and where the membership records are kept.
• Capital contributions. Record what each member contributed, whether services count, and what happens if the company needs more money.
• Voting. Specify which decisions need a majority, which need a supermajority or unanimous consent, and how deadlocks are resolved.
• Distributions. Specify when profits are paid out and whether payments must follow ownership percentages.
• Transfers. State whether a member can sell or give away an interest, and whether the other members have a right of first refusal.
• Departure and buyout. Define the events that trigger a buyout, such as death, disability, divorce, bankruptcy or a member leaving, and explain how the interest is valued.
• New members. Explain how new interests are issued and whether existing members must approve.

Do not treat these terms as formalities. Transfer and buyout clauses are the ones tested when a partnership breaks down, and they are very hard to fix once a dispute has started.

What a Useful Texas Company Agreement Covers

Beyond membership interests, most Texas company agreements address the topics below. Treat this as a checklist of subjects to raise with your attorney, not as a template.

Topic	What it should settle
Company basics	The exact legal name on the Certificate of Formation, purpose, principal office and registered agent
Management	Whether the LLC is member-managed or manager-managed, and who can sign contracts and open accounts
Membership interests	Percentages, transfers, new issuances, departures and buyouts
Capital and loans	Initial contributions, future capital calls and any loans from members
Allocations and distributions	How profit and loss are divided and when cash is distributed
Meetings and voting	How decisions are made, required notice, and whether written consent is allowed
Records and access	Where records are kept and which members can inspect them
Dispute resolution	Governing law, mediation steps and the court that hears disputes
Dissolution	Events that end the company and how it is wound up

Coordinate with a CPA on how the LLC is classified for federal tax purposes, because that classification shapes how allocations and distributions should be written. Texas levies no corporate income tax and no personal income tax. The business tax you do need to plan for is the Texas franchise tax, a privilege tax administered by the Comptroller. For the 2026 and 2027 report years, entities with total revenue at or below $2,650,000 owe no franchise tax. They must still file the Public Information Report, which is due May 15 each year to the Comptroller. Confirm current thresholds and rates with the Comptroller before you rely on them.

Texas Business Court and Forum Clauses

Many agreements include a forum clause that names where disputes will be decided. Texas now offers a specialized option. The Texas Business Court, created under Government Code Chapter 25A, opened September 1, 2024. House Bill 40, effective September 1, 2025, lowered the amount in controversy for many business disputes from $10 million to $5 million.

That change matters for drafting, but it does not make a Business Court clause automatic. A clause naming the Business Court only works if the dispute meets the statute's jurisdiction rules. Many small LLC disputes may fall below the threshold, which would leave a clause pointing to a court that cannot hear the case. Have a lawyer check whether your clause will work, and consider naming a fallback court in the same provision.

Common Mistakes

• Using an out-of-state template without changes. Texas uses the term company agreement and its own Business Organizations Code section numbers. Adjust every reference.
• Assuming the agreement must be filed. It is not filed with the Secretary of State. Keep the signed original with your company records.
• Splitting ownership without buyout terms. A percentage split with no departure rules is the most common source of expensive disputes.
• Letting the agreement go stale. When a member joins, leaves or transfers an interest, update the agreement and the membership records together.
• Skipping review. Every member should read the final document, and ideally have their own counsel review it, before anyone signs.

Next Steps

1. Confirm your formation filing. The Certificate of Formation costs $300 and can be filed through SOSDirect. Check name availability by calling the Secretary of State at (512) 463-5555. Start at the Texas Secretary of State corporations page.
2. Get a sales tax permit if you need one. Most businesses selling taxable goods or services need a Texas sales and use tax permit. It is issued at no charge and typically takes two to three weeks. Start at the Comptroller's permit page.
3. Identify your specific licenses. Texas does not issue a general state business license. The Texas Business Licenses and Permits Guide, published by the Business Permit Office within the Texas Economic Development and Tourism Office, lists the requirements that apply to your activity.
4. Draft the company agreement with professionals. Work with a Texas attorney on the legal terms and a CPA on tax classification before anyone signs.
5. Calendar your recurring filing. Set a reminder for the Public Information Report, due May 15 each year to the Comptroller, even if no franchise tax is owed.

If you have a name question, the Secretary of State's business search shows what is already on file. For free help with planning, the Texas Small Business Development Center Network offers advising across the state.

Disclaimer

This article is informational only. It is not legal or tax advice, and it does not create an attorney-client or accountant-client relationship. Texas law and agency rules change, and the right answer depends on your specific facts, owners and activities. Before you sign a company agreement, talk with a Texas-licensed attorney about its terms, including membership interests, dispute resolution and the Business Court clause, and talk with a CPA about tax classification and franchise tax filings.