How to Add Owners to a Texas LLC

By River Braun, J.D.

How to Add Owners to a Texas LLC

By River Braun, J.D.

A limited liability company (LLC) is created and governed by the laws of the state in which it forms. So, when you create an LLC in Texas, you must file a Certificate of Formation—Limited Liability Company with the Texas Secretary of State. This is a popular business entity chosen for its ease of formation and operation. Owners are called members and may have either one or multiple, who may be individuals, corporations, non-U.S. residents, and other legal entities. Below are the steps necessary to add someone.

Coworkers sitting and standing around a table talking

1. Authorize the Addition of a New Member.

Most LLCs have a provision in their operating agreement for adding new members. If yours contains such a provision, follow the process it outlines for authorizing a new member.

For those that do not have an operating agreement or a provision for adding someone, the Texas Business Organization Code requires that all current people vote unanimously to add the new addition.

Once the current members have voted, amend your operating agreement to reflect the addition of the new individual. If you did not have a provision for adding new people, you may want to amend your operating agreement to include one unless you want to continue with the unanimous voting method. Similarly, if you don't have this type of document, you may want to create one.

2. Determine Whether to Report the Change.

If you decide to add someone to your LLC, you are not required to file an amendment to Form 205. Further, you may not be required to do anything if nonmembers of the company handle your company's day-to-day operations.

However, if the new member will exercise control over operations and have management authority, you must report the change in the necessary LLC documents.

3. Report the Change If Needed.

If your new member will not have management responsibilities, your LLC can skip this step.

If you do need to report the change in your LLC's membership, note the change in ownership on the Texas Franchise Tax Public Information Report (Form 05-102). You file this form when you file your yearly franchise taxes with the Texas Comptroller of Public Accounts.

When filling the form out, be sure to mark that there is a change in your LLC's structure and fill in all other requested information—especially the name and address of the new individual. You can mail your completed Form 05-102 to the Texas Comptroller of Public Accounts. You may also report these changes by filing your yearly franchise taxes electronically.

Adding a new member to your Texas LLC is easy whether you have an operating agreement or are defaulting to the Texas Business Operation Code. If you would prefer to have a different way to vote in a new member other than a unanimous vote, then having instructions for how you would like that done need to be included in your operating agreement. If you have such a document and don't have this provision included, it's a great idea to amend it so you'll be ready for how you want to have a new member added to your LLC.

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