...
Spread the love

How to Add a Member to an LLC in Texas Properly (2024)

Max Smith

Reading Time: 6 minutes

Do you know how to add a member to an LLC in Texas? You may have a single-member LLC, but you can add members to make it a multi-member LLC. 

In fact, if you have a few members in your LLC, you can extend the number of owners in Texas. It’s legal, and you have the right to do it. On the contrary, you can also remove a member if you wish to. 

However, you must make it official. You should follow the steps to add all members of your LLC so they can officially enjoy LLC owner benefits and become responsible. 

Without further ado, let’s go through the steps to add members to your LLC in Texas.

An LLC is a special type of business structure that combines the advantages of various entities. LLC members are the people or organizations where all the members share in the business’s profits, losses, and decision-making. 

So, if you are an LLC member, you can be the business owner. You will enjoy liability protection while participating in company operations. 

Lastly, you can add or remove LLC members by following formal procedures. But do you know the procedure for adding members to your current LLC? Then read our next section!

How to Add a Member to an LLC in Texas

Adding a member to an LLC in Texas involves several essential steps. Here are the steps showing below. 

Step 1: Understand the Basics

Before adding an LLC member, you should understand what an LLC entails. LLCs operate under specific laws and regulations set by the Texas Secretary of State’s office. 

Furthermore, you are an LLC owner of your business. In that case, you must familiarize yourself with these legal requirements to ensure your company remains compliant.

Moreover, you should understand the key features and legal framework of an LLC in Texas so that your company’s owners can decide on the best structure for their business.

Step 2: Review Your Operating Agreement

As an LLC member, having an operating agreement gives you greater control over crucial decisions and operations within your business. With it, you can specify precisely how a new member will be brought in and determine their ownership share in the industry.

However, it is essential to note that forming an LLC or operating agreement is not required in Texas to control the overpower of old LLC members in your business. However, you can have this to maintain your business’s excellent health in Texas.

Step 3: Obtain Unanimous Consent

In Texas, you must follow the state’s default law if you want to add a new person as an owner or member of your LLC. On the other hand, if your business operating agreement has rules about adding new members that are different from the default Texas law, then your company can follow those rules instead of the default.

Notably, the existing LLC members might not be keen on sharing profits, but they could be open to sharing losses with a new member of the LLC. So, the negotiation process is an important step. So, it’s all about finding the right balance for your business and its members.

Step 4: Draft an Amendment to the Operating Agreement

You must update the company’s operating agreement. To do so, you must create a new amendment document, like a modification to the original operating agreement. In this amendment, you should state the name of your LLC and the specific part of the operating agreement you are updating.

Following that, you should clearly state all the details about the new member you are bringing on board, such as 

  • The name, 
  • How much ownership he will have, and 
  • What rights and responsibilities will he have as a new owner? 

Lastly, the existing LLC members should discuss partnerships among them.

Step 5: Vote on the Amendment

Once you have drafted the amendment, if the existing LLC members agree on how they will work together as partners, they should hold a second meeting to officially vote on approving this partnership. 

During this voting meeting, you and other LLC members of your business should carefully record what happens and how the voting results turn out. 

Then, if there are any disagreements later, these meeting minutes can be used to prove what was decided. So, you have to keep these detailed records.

Step 6: Update the Texas Secretary of State

You should officially notify the state of Texas about the forms and documents you must file with the Texas Secretary of State’s office. Adding a new member to your LLC is considered a significant change to the company’s structure, so you must inform the state.

Furthermore, you should file an amendment to the Certificate of Formation that reflects the new ownership structure. You can submit this amendment filing online through the Secretary of State’s website or by mailing the paperwork. 

Undoubtedly, completing this step is essential to ensure your LLC’s information is up-to-date with the state.

Step 7: Update Internal Records

In the next step, you must ensure your company’s internal records are updated correctly. You should update the official record in this ledger, such as 

  • The names of the old owners or 
  • Members of the LLC, 
  • The names of new members, and 
  • The ownership percentage

Furthermore, you can also make copies of the updated operating agreement with the rules for your LLC. Then, distribute these new copies to all the members, including the new ones, so everyone has the latest version.

Step 8: File Any Required Tax Documents

When you add a new member to your LLC, you may need to change the tax paperwork related to your business. Additionally, your business will be taxed as a partnership instead of a single-member LLC. 

That’s why you must document the tax-related information on whether your LLC had only one member before adding the new person.

Furthermore, you should get a new employer identification number (EIN). Moreover, you may also have to fill out a special form called IRS Form SS-4 to let the Internal Revenue Service (IRS) know that your business structure has changed. These tax-related steps are essential when bringing on a new LLC member.

Furthermore, in Texas, you can also remove LLC members from the business. Are you curious to know how? Then read our next section!

How to Remove a Member from an LLC in Texas

You can transfer or remove a member when you have an LLC (Limited Liability Company). Still, you have to follow some specific steps. If you want to remove yourself from an LLC, then you must know how to remove yourself from an LLC in Texas.

In Texas, the operating agreement and state outline the necessary steps for removing a member from an LLC, such as providing a written withdrawal notice, getting a unanimous vote from the other members, or following a removal process outlined in the company’s articles of organization, etc.

If a member is removed, owners may need compensation for their ownership stake in the LLC. So, the removed member is unwilling to leave the company or accept a buyout offer. In that case, the remaining members may have to court to resolve the issue.

Conclusion​

In the end, the answer to the question, “How to add a member to an LLC in Texas?” lies in the above steps. You must consider legal requirements carefully and ensure clear communication among all members. 

By following the detailed steps outlined, you can ensure a smooth and compliant process that protects the interests of your business and its owners. Staying organized and up-to-date with state and federal regulations is crucial for successfully expanding your LLC in Texas.

Key Points

  • Understand the laws and regulations governing LLCs in Texas, including the proper procedures for forming, operating, and changing ownership.
  • Examine your existing operating agreement to see how it addresses adding new members and their ownership share.
  • Get all current LLC members to agree on bringing in a new partner, following the default Texas law or your own operating agreement rules.
  • Create a formal amendment to your operating agreement that outlines the new member’s details, such as their name, ownership percentage, and rights and responsibilities.
  • Have the LLC members vote to approve the amendment, carefully documenting the proceedings in case of future disputes.
  • File an Amendment to your Certificate of Formation to reflect the new ownership structure.
  • Ensure your company’s documents and operating agreement are updated with the new member’s information.
  • Obtain a new employer identification number (EIN) and make any necessary changes to your business tax filings.
  •  

Frequently Asked Questions

What is the tax consequence of adding a member to an LLC?

When you add a member to your LLC, you’ll need to file Form 8832, which changes your tax status. You’ll also need to get an EIN, among other things.

What is an LLC amendment Form Texas?

Form 424 is an official form to change the details of an LLC’s Certificate of Formation

What is the certificate of amendment in Texas?

The Certificate of Amendment is an official form that you can use to provide the latest information regarding your LLC, such as changes in name, management structure, registered agent details, and more. 

Max Smith - LLC Formation

He is a seasoned entrepreneur and legal expert at LLC Formation Hub. With a stellar track record in both business and law, Max simplifies the complexities of LLCs. His practical insights, featured on LLC Formation Hub, empower entrepreneurs across the USA. Max merges business finesse with legal acuity to guide businesses toward success.


Spread the love
Scroll to Top
Seraphinite AcceleratorOptimized by Seraphinite Accelerator
Turns on site high speed to be attractive for people and search engines.