If you`re considering setting up a member-managed limited liability company (LLC) in Texas, you may need to create an operating agreement. An operating agreement is a legal document that outlines the rules and procedures that govern how your LLC will be run.
What is a Member-Managed LLC?
A member-managed LLC is a type of LLC where all members have an equal say in the decision-making process. This means that each member has the power to vote on matters related to the LLC`s operations, such as how profits are distributed and who should be responsible for managing the day-to-day operations.
Why Have an Operating Agreement?
While Texas law does not require LLCs to have an operating agreement, it is strongly recommended. An operating agreement can help prevent disputes between members by clarifying each member`s role and responsibilities. Additionally, having an operating agreement can help protect your LLC`s limited liability status, as it demonstrates that your LLC is a separate legal entity from its members.
What Should Be Included in an Operating Agreement?
The specific contents of an operating agreement can vary depending on the needs of your LLC, but some common elements include:
– Member Roles and Responsibilities: Define the roles and responsibilities of each member, including who is responsible for managing the LLC`s day-to-day operations.
– Voting Rights: Specify how voting rights will be allocated among members and how decisions will be made.
– Profit and Loss Allocation: Outline how profits and losses will be distributed among members.
– Contributions and Distributions: Specify how capital contributions will be made and how distributions will be determined.
– Dissolution and Termination: Detail how the LLC can be dissolved or terminated, and how any remaining assets will be distributed.
How to Create an Operating Agreement
While you can create an operating agreement on your own, it`s recommended that you seek the help of a legal professional. An attorney experienced in LLC formation can help ensure that your operating agreement complies with Texas law and contains all necessary provisions.
In conclusion, if you`re starting a member-managed LLC in Texas, it`s highly recommended that you create an operating agreement. An operating agreement can help prevent disputes between members, protect your LLC`s limited liability status, and ensure that your LLC is run in accordance with your wishes.