Multi-Member LLC Operating Agreement — Texas

Multi-Member LLC Operating Agreement (Texas)

Quick-Reference Summary

COMPANY AGREEMENT OF [LLC NAME], LLC

A Texas Multi-Member Limited Liability Company

This Company Agreement (this "Agreement" or "Company Agreement") is entered into and effective as of [__/__/____] (the "Effective Date") by and among the persons identified on the signature page as the members (each a "Member" and collectively the "Members") of [LLC NAME], LLC, a Texas limited liability company (the "Company"), under the Texas Business Organizations Code (the "Code" or "BOC").

Article I — Formation

1.1 Formation. The Company was organized on [__/__/____] by filing a Certificate of Formation (Form 205) with the Texas Secretary of State under BOC § 3.001(a) and § 101.051. The SOS file number is [________________________________].

1.2 Name. The name of the Company is [LLC NAME], LLC, complying with BOC § 5.056.

1.3 Principal Office. The principal office is [________________________________], Texas [____].

1.4 Registered Agent and Office. The Texas registered agent is [________________________________], whose Texas registered office address is [________________________________], Texas [____], designated under BOC §§ 5.201–5.207.

1.5 Duration. The Company exists perpetually unless dissolved under Article XIV and BOC §§ 11.001 et seq.

1.6 No Publication. Texas imposes no newspaper publication requirement on an LLC.

Article II — Purpose and Powers

2.1 Purpose. The Company is organized to engage in any lawful business purpose for which an LLC may be organized under the Code, including without limitation: [________________________________].

2.2 Powers. The Company has the powers granted by BOC §§ 2.101 and 101.051(a), including all powers necessary or convenient to carry on its business.

2.3 Professional LLCs. If the Company will render a professional service requiring a license, the Members shall ensure compliance with BOC Title 7 (Professional Entities).

Article III — Members and Membership Interests

3.1 Initial Members and Interests. The Members, their initial capital contributions, and their initial Membership Interests (also referred to as Percentage Interests) are:

3.2 Admission of Additional Members. Admission requires (a) the affirmative consent of Members holding [a Majority in Interest / Supermajority of __% / Unanimous] of Percentage Interests, and (b) execution of a written joinder, in accordance with BOC § 101.103.

3.3 No Personal Liability. No Member or Manager is personally liable for any debt, obligation, or liability of the Company solely by reason of being a Member or Manager (BOC § 101.114).

Article IV — Capital Contributions and Capital Accounts

4.1 Initial Contributions. Initial contributions are set forth in Section 3.1 and Exhibit A.

4.2 Capital Accounts. Capital accounts shall be maintained for each Member under Treas. Reg. § 1.704-1(b)(2)(iv).

4.3 No Interest on Capital. No interest accrues on capital contributions.

4.4 No Right to Demand Return. No Member may demand or receive any return of contribution except upon dissolution and as provided in BOC § 101.205.

Article V — Capital Calls

5.1 Mandatory Capital Calls. The Manager / Managing Member may issue a written call for additional capital if approved by Members holding [____]% of Percentage Interests and reasonably needed to fund operations, debt service, or approved capital expenditures.

5.2 Optional Capital Calls. Any other contribution is voluntary.

5.3 Failure to Contribute; Default Remedies. If a Member fails to fund a mandatory call within [thirty (30)] days of written notice (the "Cure Period"), the non-defaulting Members may, at their option:

• (a) loan the defaulted amount to the Company at the WSJ prime rate plus [____]%;
• (b) contribute the defaulted amount and dilute the defaulting Member's Percentage Interest by application of the formula in Exhibit B;
• (c) cause the Company to enforce contribution promises under BOC § 101.153; and/or
• (d) pursue any other remedy at law or in equity.

5.4 Compromise. A compromise of an obligation to contribute requires the consent of all Members (BOC § 101.154).

Article VI — Allocations and Distributions

6.1 Allocations. Net Profits and Net Losses are allocated among the Members in proportion to Percentage Interests, subject to Treas. Reg. § 1.704-1(b)(2) and § 1.704-2 regulatory allocation rules.

6.2 Distributions — Waterfall. Available Cash, when distributed, shall be paid in the following order:

1. First, to the Members in proportion to and to the extent of any Preferred Return of [____]% per annum on Unreturned Capital Contributions;
2. Second, to the Members in proportion to and until full return of Unreturned Capital Contributions;
3. Third, to the Members in proportion to their Percentage Interests (or under such promote/carry arrangement set forth in Exhibit C).

6.3 Timing. Distributions shall be made at such times as the Manager / Managing Member determines.

6.4 Tax Distributions. The Company shall (subject to Section 6.6 and legally available funds) distribute to each Member, on or before the 15th day of the third month following each taxable year, the Assumed Tax Rate of [____]% multiplied by the Member's allocable taxable income, as an advance against distributions under Section 6.2.

6.5 Distributions in Kind. No Member may compel a distribution in kind.

6.6 Solvency Limitation. No distribution shall be made that violates BOC § 101.206 (insolvency limitation).

Article VII — Management

7.1 Management Structure. The Company is [Member-managed / Manager-managed], as stated in its Certificate of Formation under BOC § 101.251.

7.2 Member-Managed Alternative. If member-managed: Management is vested in the Members, with each Member having authority and voting in proportion to Percentage Interest under Section 8.1.

7.3 Manager-Managed Alternative. If manager-managed: The Company has [____] Manager(s), initially [________________________________]. Each Manager has the authority described in BOC § 101.254.

7.4 Actions Requiring Supermajority or Unanimous Consent. Notwithstanding any other provision, the following require the unanimous written consent of all Members (or Supermajority of [____]% where indicated):

• (a) amend this Agreement or the Certificate of Formation (unanimous; cf. BOC § 101.053);
• (b) admit a new Member (Supermajority);
• (c) sell, exchange, lease (other than ordinary course), or pledge all or substantially all Company assets (Supermajority);
• (d) merge, convert, interest-exchange, domesticate, or wind up the Company (unanimous);
• (e) cause the Company to file a bankruptcy petition (unanimous);
• (f) make a check-the-box federal tax election under Treas. Reg. § 301.7701-3 or S-election (Supermajority);
• (g) incur indebtedness in excess of $[__________] (Supermajority);
• (h) approve any related-party or interested-Member/Manager transaction (disinterested Majority);
• (i) create, register, or terminate any Series under Article XV (unanimous);
• (j) issue any new class of Membership Interest (unanimous).

7.5 Officers. The Manager(s) may appoint officers (President, CEO, Secretary, Treasurer, CFO) with the authority delegated in writing under BOC § 101.255.

7.6 Indemnification. To the fullest extent permitted by BOC §§ 8.001 et seq. (applied to LLCs via BOC § 101.402), the Company shall indemnify each Member, Manager, and officer for losses arising from good-faith conduct on behalf of the Company.

Article VIII — Voting Rights and Member Meetings

8.1 Voting — By Percentage Interest. Each Member votes in proportion to its Percentage Interest. The default rule of BOC § 101.354 (majority-in-interest decisions in member-managed LLCs) is varied only by Section 7.4.

8.2 Annual Meeting. An annual meeting shall be held on [__/__/____] (or such other date as designated) at the principal office or by remote communication.

8.3 Special Meetings. Special meetings may be called by (a) the Manager(s), or (b) Members holding at least [____]% of Percentage Interests, on not less than [ten (10)] days' written notice.

8.4 Quorum. A quorum is Members holding a Majority in Interest, in person or by proxy.

8.5 Action by Written Consent. Any action may be taken without a meeting by the written consent of Members holding the Percentage Interest required to authorize the action under BOC § 101.358.

8.6 Remote Participation. Members may participate by telephone, videoconference, or similar means under BOC § 101.357.

Article IX — Fiduciary Duties and Standards of Conduct

9.1 Statutory Framework. BOC § 101.052 grants broad freedom of contract for company agreements, subject to BOC § 101.054 (certain duties cannot be waived). Texas common-law fiduciary doctrine continues to apply to managers and controlling members.

9.2 Duty of Loyalty. Each Manager and each managing Member shall (a) account to the Company for any benefit derived from the Company's activities; (b) refrain from acting on behalf of an adverse party in any matter connected with the Company's business; and (c) refrain from competing with the Company, except as expressly permitted under Section 9.4.

9.3 Duty of Care. Each Manager and each managing Member shall act in good faith, with ordinary care, in a manner reasonably believed to be in the Company's best interest, refraining from gross negligence, willful misconduct, or knowing violation of law.

9.4 Modification of Duties. Pursuant to BOC § 101.401 and § 101.052, and to the extent not prohibited by BOC § 101.054, the Members agree:

• (a) Members may engage in outside business activities (including competing ventures) except to the extent identified in Schedule 9.4;
• (b) the doctrine of corporate (company) opportunity is modified so that opportunities outside the scope identified in Schedule 9.4 are not Company opportunities;
• (c) interested-Member or interested-Manager transactions are permitted if approved under Section 7.4(h).

9.5 Nonwaivable Provisions. Nothing herein eliminates (a) the contractual obligation of good faith, (b) liability for intentional misconduct or knowing violation of law, (c) the right to inspect books and records under BOC § 101.502, or (d) the court's power to decree winding up under BOC § 11.314.

Article X — Transfer Restrictions, ROFR, Tag-Along, Drag-Along

10.1 General Restriction. No Member may transfer all or any portion of its Membership Interest except in compliance with this Article X, BOC §§ 101.108–101.110, and applicable securities laws.

10.2 Permitted Transfers. Transfers to a Permitted Transferee (defined in Exhibit D to include revocable trusts of the Member, immediate family members, and entities wholly owned by the Member) are permitted without consent, provided the transferee executes a written joinder.

10.3 Right of First Refusal (ROFR). Before any non-permitted transfer, the selling Member shall deliver a Sale Notice describing the proposed transferee, price, and terms. The Company has [thirty (30)] days, and thereafter the non-selling Members have [thirty (30)] days, to elect to purchase the offered interest on the same terms.

10.4 Tag-Along. If a Member (or group) holding more than [____]% of Percentage Interests sells to a third party (other than under ROFR), the remaining Members may tag along pro-rata on the same terms.

10.5 Drag-Along. If Members holding at least [____]% of Percentage Interests approve a sale of the Company, the remaining Members shall sell on the same terms (subject to Exhibit E minority protections).

10.6 Admission of Transferee. A transferee of a Membership Interest is admitted as a Member only upon (a) the consent required under Section 3.2, and (b) execution of a written joinder. Without admission, the transferee is an assignee with only the right to receive distributions (BOC § 101.108).

10.7 Void Transfers. A transfer in violation of this Article X is void as against the Company.

Article XI — Buy-Sell Provisions

11.1 Triggering Events. A Member's Membership Interest is subject to mandatory purchase upon any of the following with respect to such Member (the "Departing Member"):

• (a) Death;
• (b) Disability ([180] consecutive days or [270] days in any 12-month period);
• (c) Divorce (to the extent a court awards a Member's interest, or any portion, to a non-Member spouse — note: Texas is a community-property state and the non-Member spouse may have community-property rights without being admitted as a Member);
• (d) Bankruptcy of a Member (voluntary or involuntary);
• (e) Voluntary Withdrawal upon [ninety (90)] days' written notice;
• (f) For-Cause Expulsion by unanimous vote of the other Members for (i) material breach uncured for [thirty (30)] days; (ii) conviction of a felony or crime of moral turpitude; (iii) gross negligence or willful misconduct materially harming the Company; or (iv) conduct making it not reasonably practicable to carry on with such Member.

11.2 Purchase Option / Obligation.

• (a) Company option for [sixty (60)] days at the Purchase Price determined in Section 11.3;
• (b) if not fully exercised, remaining Members have a further [thirty (30)] day pro-rata option; and
• (c) for Death, Disability, and Bankruptcy, purchase is mandatory to the extent of available insurance or reserve.

11.3 Valuation Methodology. Purchase Price is Fair Market Value determined by:

• (a) good-faith agreement within [thirty (30)] days; failing which,
• (b) appraisal by a qualified independent business appraiser. If the parties cannot agree on an appraiser, one shall be appointed by the AAA. Minority and marketability discounts are excluded unless Exhibit F specifies otherwise.

11.4 Payment Terms. Unless funded by insurance: [twenty percent (20%)] cash at closing; balance over [five (5)] years in equal annual installments at the applicable federal mid-term rate, secured by the purchased interest.

11.5 Closing. Within [sixty (60)] days after price determination at the principal office.

Article XII — Charging Order

12.1 Charging Order — Exclusive Remedy. Under BOC § 101.112(d), entry of a charging order is the exclusive remedy by which a judgment creditor of a Member or transferee may satisfy a judgment from the Member's Membership Interest.

12.2 No Foreclosure. Under BOC § 101.112(c), the charging-order lien may not be foreclosed under the Code or any other law. The judgment creditor has only the right to receive distributions that would otherwise be paid to the judgment debtor (§ 101.112(b)).

12.3 No Reach to Company Property. Under BOC § 101.112(f), a creditor has no right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of the Company.

12.4 Same Rule for SM and MM. Under BOC § 101.112(g), this charging-order regime applies equally to single-member and multi-member LLCs.

12.5 Exemptions Preserved. Nothing herein deprives any Member or transferee of applicable exemption laws (§ 101.112(e)).

Article XIII — Deadlock and Dispute Resolution

13.1 Internal Resolution. Any Member may declare a Deadlock by written notice. The Members shall meet within [fifteen (15)] days.

13.2 Mediation. If unresolved, the dispute proceeds to non-binding mediation under the JAMS or AAA Mediation Rules at [________________________________], Texas.

13.3 Arbitration. If mediation fails after [sixty (60)] days, the dispute shall be finally resolved by binding arbitration before a single arbitrator under the AAA Commercial Arbitration Rules, in [________________________________] County, Texas, governed by the Federal Arbitration Act and the Texas General Arbitration Act (Tex. Civ. Prac. & Rem. Code Ch. 171).

13.4 Buy-Sell Shotgun. If a Deadlock persists for [ninety (90)] days, either side ("Offeror") may serve a shotgun notice specifying a price per 1% of Percentage Interest. The Offeree shall, within [thirty (30)] days, elect to (a) sell its entire interest at that price, or (b) buy the Offeror's entire interest at that price.

13.5 Judicial Winding Up. Nothing in this Article XIII limits any Member's right under BOC § 11.314 to apply for a court decree of winding up on grounds that economic purpose is unreasonably frustrated, Members are in deadlock, or it is not reasonably practicable to carry on the business in conformity with this Agreement.

Article XIV — Dissolution and Winding Up

14.1 Events of Winding Up. The Company shall wind up upon the first to occur of, per BOC § 11.051 and § 101.552:

• (a) an event specified in this Agreement (e.g., expiration of duration);
• (b) the affirmative vote required under Section 7.4(d);
• (c) the occurrence of an event of withdrawal of all Members without continuation;
• (d) a court decree of winding up under BOC § 11.314; or
• (e) involuntary termination by the Secretary of State.

14.2 Distribution on Winding Up. Assets shall be applied under BOC § 11.053 and § 101.612 (for series):

1. to creditors (including Members as creditors) other than for distributions;
2. to Members for unpaid distributions; and
3. to Members in accordance with Section 6.2.

14.3 Certificate of Termination. Upon completion, file a Certificate of Termination with the Secretary of State (Form 651) under BOC § 11.101, attaching a Certificate of Account Status from the Comptroller.

Article XV — Texas-Specific Provisions

15.1 Franchise Tax (Margin Tax). The Company is subject to the Texas franchise (margin) tax under Tex. Tax Code Ch. 171. The Company shall file a Franchise Tax Report and Public Information Report (PIR) annually with the Texas Comptroller by May 15 of each year.

15.2 No Annual Report to SOS. Texas does not require a separate annual report to the Secretary of State; the PIR filed with the Comptroller serves that function.

15.3 Series Election (if applicable). [The Company elects / The Company does not elect] to be a Series LLC under BOC §§ 101.601–101.622. If elected:

• (a) the Certificate of Formation contains the series authorization notice required by BOC § 101.604;
• (b) the Company shall maintain records that account for assets associated with each series separately from other assets of the Company or any other series, per BOC § 101.603;
• (c) each "protected series" enjoys liability segregation only if (i) the series-authorization notice is filed, and (ii) records are maintained separately;
• (d) a "registered series" requires filing a Certificate of Registered Series with the SOS and pays a $300 fee per registered series (BOC § 101.6031);
• (e) the rights, powers, duties, members, managers, and assets of each series are set forth in Exhibit H.

15.4 Federal Tax Classification. The Company shall be taxed as a partnership under Subchapter K unless and until an election under Treas. Reg. § 301.7701-3 (or Form 2553) is approved under Section 7.4(f).

15.5 Partnership Representative. The Company designates [________________________________] as Partnership Representative under I.R.C. § 6223.

15.6 Community Property. Texas is a community-property state. A spouse of a Member may have community-property rights in the Member's Membership Interest.

Article XVI — General Provisions

16.1 Amendment. Amendments require a writing signed by all Members under Section 7.4(a) and BOC § 101.053.

16.2 Governing Law. Texas law governs, without regard to conflict-of-laws rules; specifically, the internal affairs of the Company are governed by BOC § 1.103.

16.3 Venue. Subject to Article XIII, exclusive venue is the state and federal courts in [________________________________] County, Texas.

16.4 Severability. If any provision is invalid, the remainder remains in full force.

16.5 Integration. This Agreement and the Certificate of Formation constitute the entire agreement of the Members with respect to the Company.

16.6 Counterparts; Electronic Signatures. Counterparts and electronic signatures are permitted under Tex. Bus. & Com. Code Ch. 322 (Texas UETA).

16.7 Records. The Company shall maintain records required by BOC § 3.151 and § 101.501 at its principal office.

16.8 Notices. Notices are delivered as set forth in Exhibit G.

Signature Block

IN WITNESS WHEREOF, the Members have executed this Company Agreement as of the Effective Date.

The Company joins in this Agreement to evidence its acceptance:

[LLC NAME], LLC

By: [________________________________]
Name: [________________________________]
Title: [Manager / Managing Member]

Pre-Execution Checklist

☐ Certificate of Formation (Form 205) filed with Texas Secretary of State; $300 fee paid
☐ Texas SOS file number recorded in Section 1.1
☐ Federal EIN obtained from IRS (Form SS-4)
☐ Texas registered agent designated; written consent obtained
☐ Initial capital contributions funded and recorded on books and Exhibit A
☐ Separate Company bank account opened in Company name
☐ Partnership tax classification confirmed (or Form 8832/2553 election made)
☐ Partnership Representative designated for BBA centralized audit
☐ Texas Comptroller Webfile account created; Franchise Tax / PIR calendar set (May 15)
☐ Sales-and-use-tax permit obtained if applicable; sales tax responsible party identified
☐ If Series LLC elected, series notice in Certificate of Formation and per-series records (Exhibit H)
☐ If any registered series, Certificate of Registered Series (Form 312) filed; $300 per series
☐ Spousal consents (Exhibit I) obtained from married Members (community-property concern)
☐ All Exhibits (A, B, C, D, E, F, G, H, I) and Schedule 9.4 completed
☐ Buy-sell funding evaluated (life insurance, disability insurance, sinking fund)
☐ Securities-law compliance reviewed (federal Reg D / Texas Securities Act Tex. Gov't Code Ch. 4001)
☐ Company Agreement executed by all Members and retained at principal office
☐ Beneficial Ownership Information report filed with FinCEN under the Corporate Transparency Act (or exemption documented)

Sources and References

• Texas Business Organizations Code, Chapter 101 — https://statutes.capitol.texas.gov/Docs/BO/htm/BO.101.htm
• Tex. Bus. Orgs. Code § 101.112 (Charging order) — https://statutes.capitol.texas.gov/Docs/BO/htm/BO.101.htm#101.112
• Tex. Bus. Orgs. Code §§ 101.601–101.622 (Series LLC) — https://statutes.capitol.texas.gov/Docs/BO/htm/BO.101.htm#101.601
• Tex. Bus. Orgs. Code § 11.314 (Involuntary winding up) — https://statutes.capitol.texas.gov/Docs/BO/htm/BO.11.htm#11.314
• Texas Secretary of State, Business Filings — https://www.sos.state.tx.us/corp/index.shtml
• Texas SOS Form 205 (Certificate of Formation – LLC) — https://www.sos.state.tx.us/corp/forms/205_boc.pdf
• Texas SOS Form 312 (Certificate of Registered Series) — https://www.sos.state.tx.us/corp/forms_boc.shtml
• Texas Comptroller, Franchise Tax — https://comptroller.texas.gov/taxes/franchise/
• Texas Tax Code Ch. 171 (Franchise Tax) — https://statutes.capitol.texas.gov/Docs/TX/htm/TX.171.htm
• Texas SOS Formation FAQs — https://www.sos.state.tx.us/corp/formationfaqs.shtml
• IRS Partnership Representative / BBA audit regime — https://www.irs.gov/businesses/partnerships/bba-centralized-partnership-audit-regime