Sample Texas LLC Company Agreement: What a Real One Looks Like (and Why Most Templates Fall Short)
A medical-device entrepreneur in Austin formed a Texas LLC to commercialize a $1.4 million NIH-funded prototype. He used a template his cousin's attorney had drafted years earlier for a Tennessee LLC, swapped the state references, and signed. Two years later he raised a Series A and the lead investor's counsel rejected the company agreement during diligence. The agreement did not address Texas-specific issues: no charging-order language tied to Tex. Bus. Orgs. Code § 101.112, no franchise-tax allocations, no protective transfer-restriction language tailored to Chapter 101, no provisions for Texas Series LLC sub-cells he might want later. The cleanup before close cost him $36,000 and a four-week delay that nearly killed the term sheet.
Texas calls the document a "Company Agreement," not an "Operating Agreement," but the substance is the same: it is what tells a court (and a banker, an investor, or an IRS auditor) what the parties actually agreed to. A weak template throws most of the protection away before you ever sign it.
Why the Texas Company Agreement matters
The Texas Business Organizations Code, codified at Tex. Bus. Orgs. Code § 101 et seq., is the governing statute. Section 101.001 and following define the Company Agreement and give it broad enforceability. Section 101.052 provides that the Company Agreement governs the internal affairs of the LLC and may contain any provisions for the regulation and management of the company that are not inconsistent with law.
In other words: Texas, like Delaware, leans toward freedom of contract. The Company Agreement is the law of your LLC, and Texas courts will enforce what it says, including provisions that would not be permissible in many other states.
Garrett Sutton of Sutton Law Center, who has practiced in Texas LLC formation for decades, has written that the Texas statute is one of the most flexible in the country, but the flexibility only matters to LLCs whose Company Agreements actually use it. (Sutton Law, https://www.sutlaw.com.)
What a real Texas Company Agreement contains
What follows is a section-by-section walkthrough of a substantive multi-member, manager-managed Texas LLC Company Agreement.
Article I, Formation
Names the company, the date, the principal office, and the registered agent. Cites Tex. Bus. Orgs. Code § 101 et seq. as the governing statute. Sets Texas as the choice-of-law and venue.
Article II, Purpose and Term
Lawful purpose, perpetual term unless dissolved per the agreement. Tex. Bus. Orgs. Code § 11.301 governs voluntary winding-up.
Article III, Members and Capital Contributions
Lists members, units (or percentage interests), initial capital contributions. Includes the limited-liability shield language tied to Tex. Bus. Orgs. Code § 101.114 (no member personally liable for company debts solely by reason of being a member).
Article IV, Allocations and Distributions
The single most-overlooked section in cheap templates. A real Texas Company Agreement gives the manager (or board) full discretion over distributions. It states explicitly that no distribution is required to satisfy a charging order. It addresses tax distributions, with sequencing rules to manage the Texas franchise-tax timing.
Article V, Tax Treatment
Federal tax classification (partnership for multi-member by default, with reservation of the right to elect S-corp under IRS Form 2553 and Treasury Reg § 301.7701-3). Addresses the Texas franchise tax, which Texas LLCs above the no-tax-due threshold must file annually.
Article VI, Management
Manager-managed for most institutional structures. Defines the manager(s) or board. Lays out decision-making thresholds: simple majority for ordinary actions, supermajority for major actions (asset sales, dilutive issuances, fundamental changes).
Article VII, Transfers of Interests
Restrictions on transfer, right of first refusal, tag-along, drag-along. Tex. Bus. Orgs. Code § 101.108 governs assignment of membership interests; the Company Agreement can layer additional restrictions on top of the statutory baseline.
Article VIII, Dissolution and Continuation
Includes a successor-member clause to prevent dissolution on a member's death or incapacity. Tex. Bus. Orgs. Code § 11.051 lists events of termination; a written agreement that names a successor avoids the involuntary winding-up that the statute would otherwise trigger.
Article IX, Charging Order Protection
Cites Tex. Bus. Orgs. Code § 101.112 by section number. States that:
- The charging order is the exclusive remedy a judgment creditor of a member has against the member's interest. Section 101.112(d) makes this explicit.
- The holder of a charging order is treated as a transferee of the economic interest only, with no voting, management, or inspection rights.
- The company is not required to make any distribution to satisfy a charging order.
- Tax allocations continue to flow to the charged interest, with no guarantee of corresponding cash distributions (the "phantom income" pressure that often forces a creditor to settle).
The 2011 amendment to § 101.112 reinforced that even single-member Texas LLCs receive charging-order-only treatment.
Article X, Indemnification
The company indemnifies members and managers for liabilities arising out of company business, except for willful misconduct, fraud, or gross negligence. Tex. Bus. Orgs. Code § 101.402 authorizes broad indemnification.
Article XI, General Provisions
Governing law (Texas), entire agreement, amendments, severability, electronic signatures, banking authority, confidentiality, dispute resolution.
Article XII, Reorganization and Domestication
Authority to convert, domesticate, or transfer the company under Tex. Bus. Orgs. Code §§ 10.101-10.108 (conversion) and § 10.151 (domestication). Useful if the structure needs to relocate.
Article XIII, Texas Franchise Tax Provisions
A Texas-specific section addressing the franchise tax, the no-tax-due threshold, the Public Information Report, and allocations of franchise-tax burdens among members in proportion to interests. This is housekeeping, but it prevents disputes when the franchise-tax bill comes.
Article XIV, Series LLC Provisions (if applicable)
Texas allows a Series LLC under Tex. Bus. Orgs. Code § 101.601 et seq. If the entity is a Series LLC, the Company Agreement must establish the framework for individual series, separate records, separate assets, and independent liability shields.
What cheap Texas templates leave out
The form you find on a free legal site typically covers Articles I, II, III, and a stripped-down VII. It almost never includes:
- Charging-order language with § 101.112 cited and the transferee-status mechanic spelled out.
- Tax-allocation-without-distribution language (the phantom-income lever).
- Successor-member or continuation provisions.
- Texas franchise-tax allocations and Public Information Report responsibilities.
- Series LLC framework provisions where the entity is intended to use that structure.
- Tag-along, drag-along, right-of-first-refusal mechanics.
- Deadlock procedures.
Clint Coons of Anderson Business Advisors has made the same point repeatedly: filing the LLC is the easy 5%; the Company Agreement is the 95% that holds in court. (Anderson Business Advisors, https://andersonadvisors.com.)
What this means for your Texas LLC
If your Company Agreement is a one-pager you signed at formation, you are operating under the statutory defaults rather than under a structure you actually designed. Texas's freedom-of-contract principle is doing none of the work it can do for you. You can replace the document at any time. A new Company Agreement does not require a state filing. It requires careful drafting against Tex. Bus. Orgs. Code § 101 et seq.
We are a registered agent and LLC formation service for Texas. We provide a substantive Texas Company Agreement with every formation we file, drafted against the actual provisions of the Business Organizations Code. If you formed elsewhere and want a stronger document, we can prepare one.
Frequently Asked Questions
Is a Texas LLC Company Agreement required by law?
Texas does not require you to file your Company Agreement with the state, but Tex. Bus. Orgs. Code § 101.052 explicitly recognizes the Company Agreement as the governing document for the LLC's internal affairs. Operating without one means the default statutory rules apply.
Does Texas protect single-member LLCs under the charging-order statute?
Yes. Tex. Bus. Orgs. Code § 101.112 was amended to clarify that the charging order is the exclusive remedy for both single-member and multi-member Texas LLCs. Texas does not have the kind of judicial gap that Florida has under Olmstead v. FTC, 44 So. 3d 76 (Fla. 2010).
What is the difference between an Operating Agreement and a Company Agreement?
In Texas, the term used in the statute is "Company Agreement." Functionally, it is the same document other states call an Operating Agreement. The substance is identical.
Should I use a free Company Agreement template?
Free templates are useful for understanding structure. They are rarely useful as a substitute for a real Texas Company Agreement, because they do not invoke the freedom-of-contract provisions or address Texas-specific items (franchise tax, Public Information Report, Series LLC framework).
Can I update my Company Agreement later?
Yes. The agreement is amended according to its own terms. No state filing is required. Amendments should be kept with the company's permanent records.
Disclosure: We cite Garrett Sutton (Sutton Law Center) and Clint Coons (Anderson Business Advisors) as industry voices we follow. We have no business relationship with either firm. Their materials are referenced for educational purposes; we do not represent that they endorse, sponsor, or are affiliated with our service. Readers should consult licensed counsel for advice specific to their situation.
We are a registered agent and LLC formation service. We are not a law firm and do not provide legal advice. The information on this page is for educational purposes only.