What this form is for
This form establishes the internal governance rules for your Texas LLC, defining member roles, profit distribution, voting rights, and operational procedures. Banks require this document to verify ownership structure, management authority, and who has signing power for loans.
Before you start
- Your LLC's legal name exactly as filed with the Texas Secretary of State and your file number
- Complete names, addresses, and ownership percentages for all members
- Each member's initial capital contribution amount (cash, property, or services)
- Your LLC's EIN from the IRS
- Decision on profit distribution method (pro-rata by ownership or another agreed formula)
Step-by-step
1. Fill in the LLC name, formation date, and Texas as the governing state in the opening section. Include your Secretary of State file number.
2. List all members in the membership section with full legal names, residential addresses, ownership percentages, and the dollar value of each member's initial contribution. Percentages must total exactly 100 percent.
3. In the management section, confirm this is member-managed (all members participate in decisions) and specify the voting threshold for major decisions. Texas LLCs typically use majority vote for ordinary matters and unanimous consent for structural changes like admitting new members or dissolving the company.
4. Complete the capital contributions section showing what each member has already contributed and whether additional contributions may be required later. Be specific about whether contributions were cash, equipment, or other property.
5. Detail the profit and loss allocation method. Most choose distribution proportional to ownership percentages, but you can specify another arrangement if all members agree.
6. Fill in the meeting requirements section, including how often members meet and how decisions get documented. Texas does not mandate annual meetings for member-managed LLCs, but banks prefer seeing regular governance.
7. Complete the transfer restrictions section, which controls whether members can sell their interests to outsiders. Most small LLCs require unanimous member approval before any transfer.
8. Have every member sign and date the signature page. Texas does not require notarization for operating agreements, but some lenders prefer it for loan applications.
What lenders look for
- Banks scrutinize the signature authority section to confirm who can legally bind the LLC to loan agreements. If only certain members can sign, that must be explicit and those individuals must sign loan documents.
- Underwriters reject agreements with incomplete capital contribution records or missing member addresses. These gaps suggest poor recordkeeping and raise concerns about business legitimacy.
- Vague profit distribution clauses create red flags. Lenders want clear, predictable cash flow allocation to assess whether the business can service debt from member distributions.