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Using an LLC operating agreement can be essential for guidance

| Mar 11, 2022 | Business Formation |

Creating an operating agreement (also called a company agreement) is essential if you’re starting a limited liability company (LLC) in Texas. Knowing how to write one and what to include in it should guide and safeguard you from legal challenges.

Having an LLC operating agreement can be beneficial

When you’re structuring your business as a limited liability company, an LLC operating agreement enables you to focus on the most crucial areas and stay congruent with your goals. Whether you’re a single-member LLC or you have many members, including this documentation is typically recommended.

Including three significant sections is a must

Three major sections will likely be used in your LLC operating agreement. These include the following:

  • Basic company information
  • Member and manager information
  • Additional provisions depending on the size of your LLC

Basic company information

The basic information on your company will be included in your certificate of formation filed with the state. This should consist of your company’s legal name, assumed name, company address, the name and address of the registered agent, and a statement of whether your LLC is manager-managed or member-managed. Including a business purpose, statement of intent, duration of your business and tax treatment can also be helpful.

Member and manager information

Including member and manager information should also be completed with your LLC operating agreement. These should include each member’s name, address, title, job responsibilities and ownership percentages. Specifying if your LLC is manager-managed or member-managed is also important. Here’s a list of essential topics frequently used in this section:

  • Member contributions
  • Member meetings
  • Voting and approval rights
  • Member compensation
  • New members and exit rights
  • Dissolution

Having a third central section including “Additional Provisions” is also recommended when creating an LLC operating agreement. Some of these provisions may be associated with the death, disability or divorce of a member, dispute resolution or special agreements.

Knowing how to create an LLC operating agreement and what to include should make it more straightforward for you to conduct operations. You can turn to this information whenever you’re unsure about the company’s direction.