Posted by: Nov 25, 2020

texas-llc-change-of-ownership

Creating your Texas limited liability company (LLC) is an exciting process. However, it also takes a lot of work and planning. 

But as with all things, the needs and structure of your LLC can change over time. So what do you do when the initial members listed for your LLC need to be changed? Or how do you add members to your LLC as it continues to grow and expand? 

These are all common questions for many Texas LLC owners. Fortunately, there is a way to add or change members of your LLC under Texas LLC change of ownership rules.  

These rules can be complicated to navigate. But if you are a member of a Texas LLC or are in the process of creating an LLC, it is important to understand how it all works. 

The Curley Law Firm is here to help you get the answers you need so that you can add members to your LLC in Texas when necessary. Contact business law attorney Adam Curley today to discuss your case and see what the Curley Law Firm can do for you.

What Is a “Member” of an LLC?

A member of an LLC is any person or entity that holds an ownership or membership interest in the LLC. Thus, “member” is essentially another word for an owner of an LLC. 

An LLC must have one or more members, and a member may be an individual, partnership, corporation, trust, or any other legal or commercial entity. 

What’s the Difference Between a Member-Managed LLC and a Manager-Managed LLC?

To create your LLC, you must file a Form 205 Certificate of Formation with the Texas Secretary of State. In this Certificate of Formation, you must identify the management structure of your LLC. 

In Texas, an LLC can be member-managed or manager-managed. 

In a member-managed LLC, all members of the LLC participate in the management of the LLC. In a manager-managed LLC, however, members retain their ownership interest in the LLC but surrender their management duties and authority to one or more “managers” who do not have to be members of the LLC.

In the Certificate of Formation, you must state whether the LLC will have managers. If so, you must list the names and addresses of each initial manager. 

Alternatively, if the LLC will not have managers, then you must provide the name and address of each initial member of the LLC. 

How to Add a Member to an LLC in Texas

If your Texas LLC requires change of ownership, it is important to know where to start. There are a few steps to take to add a member to an LLC in Texas. 

Determine Whether and How Your LLC’s Operating Agreement Authorizes the Addition of a Member

First, it is important to check the provisions of the LLC’s operating agreement. Frequently, LLCs will have one or more provisions in the operating agreement pertaining to the process to add or change members of the LLC. If your LLC’s operating agreement does have such a provision, that will outline the process you should follow. 

If the Operating Agreement Does Not Have Rules About How to Add a Member to Your LLC in Texas, Use the Texas Default Rules

If, on the other hand, your LLC’s operating agreement does not contain a provision for adding a member, then the default rules under Texas law will apply instead. 

Under Texas Business Organization Code section 101.105, a new member may be added to an LLC but only with the approval of all current members of the LLC. Thus, approval of the new member must be unanimous.  

Does My LLC Need to Report the Change in Membership?

The answer to this question depends on the specific circumstances in place for your Texas LLC.

Generally, no. There is no filing requirement with the Texas Secretary of State when there is a change only in ownership of an LLC. 

However, if your LLC has managers, you must update any management changes with the Secretary of State. This can be done either: 

  • Through a required annual update to the LLC’s management information on the Public Information Report; or 
  • By filing an amendment to update the LLC’s management information. 

Both options will update the LLC’s management information in the Secretary of State’s records. 

Contact a Texas LLC Change of Ownership Business Attorney Today

If you have any questions about Texas LLC change of ownership requirements, The Curley Law Firm is standing by and ready to help. 

Adam Curley is the founder and lead attorney at the Curley Law Firm where he has dedicated his practice to assisting business clients in need. 

Mr. Curley has extensive experience helping his clients with business entity formation, contract disputes, business litigation, and more. Regardless of your business’s specific needs, The Curley Law Firm has the knowledge and resources to help.

Contact The Curley Law Firm today to discuss your case and learn more about what we can do for you.