What this form is for
This form establishes the internal governance rules and ownership structure for your Texas LLC. Small-business owners use this agreement when forming a new LLC or formalizing an existing one to define member responsibilities, profit distributions, and decision-making authority.
Before you start
- Legal business name exactly as filed with the Texas Secretary of State and your File Number
- Full legal names and addresses of all LLC members plus their ownership percentages
- Initial capital contributions from each member (cash amounts and property descriptions if applicable)
- Your registered agent name and Texas street address for service of process
- Federal Employer Identification Number (EIN) from the IRS
Step-by-step
1. Complete the heading section with your LLC's legal name, formation date, and Texas as the governing state. Insert your Secretary of State File Number if your bank requires it for verification.
2. Fill in Article 1 with each member's full legal name, mailing address, ownership percentage, and initial contribution amount. Percentages must total exactly 100 percent.
3. In Article 2 (Management), confirm member-managed structure and specify voting thresholds for major decisions. Texas default is majority vote, but you can require unanimous consent for specific actions like taking loans, admitting new members, or selling substantial assets.
4. Complete Article 3 (Capital Contributions) with the date and amount each member contributed. Describe non-cash contributions with fair market values. This section creates your initial capital account balances.
5. Article 4 (Distributions) specifies how profits and losses allocate among members. Most use pro-rata by ownership percentage. State your distribution timing (quarterly, annual, or as determined by vote).
6. Fill Article 5 (Transfer Restrictions) to control whether members can sell their interests. Most lenders prefer right-of-first-refusal clauses preventing ownership changes without remaining members' approval.
7. Complete Article 6 (Dissolution) with events that trigger LLC termination and the winding-up process. Texas requires you file a Certificate of Termination with the Secretary of State upon dissolution.
8. All members must sign and date the signature page. Texas does not require notarization for operating agreements, but some banks request it anyway for loan files.
What lenders look for
- Banks verify that capital contributions match or exceed your loan request to confirm members have skin in the game. Undercapitalized LLCs with minimal member investment raise red flags about your commitment and ability to weather downturns.
- Lenders scrutinize transfer restrictions and dissolution clauses because unrestricted membership transfers or easy dissolution threaten loan security. Include provisions requiring lender consent before admitting new members or dissolving during an active loan term.
- Missing signatures or mismatched ownership percentages between your Operating Agreement and loan application cause immediate processing delays and credibility concerns with underwriters.