How to Remove a Member From an LLC in Texas? (Full Guide)
Removing a member from a Texas LLC isn't a one-size-fits-all process — it hinges entirely on what's written in your operating agreement and your Certificate of Formation.
Our team at VentureSmarter has spent over a decade working through LLC member removal situations across multiple Texas-based companies. We've seen this trip up a lot of first-time founders who assume the process is simpler than it is. Below, we'll walk you through exactly how it works.
Everything here is backed by hands-on research and input from our panel of attorneys.
Quick Summary
- To remove a member from an LLC in Texas, follow the provisions indicated in the operating agreement.
- If an entity does not have bylaws, the state allows the members to decide on the issue.
- According to the U.S. Small Business Administration, 99.8% of all companies in Texas will be small businesses in 2022.
- After the member is removed, I highlight that it is necessary to inform the Secretary of State and file an amendment to the LLC's formation documents.
Understanding LLC Membership Structures
LLC membership structures are shaped by state business laws and the LLC's operating agreement. Each member holds specific rights and obligations — voting on major decisions, sharing in profits and losses, and accessing company records.
In Texas, the operating agreement is the document that controls everything, including how member removal works. Before you take any action, you need to read it thoroughly. Skipping that step is where most removal disputes start.
When each member's role and ownership interest are clearly defined upfront, the LLC runs more smoothly and you're far less likely to end up in a dispute. That said, even a well-drafted agreement won't protect you if nobody bothers to follow it.
Every member should know their rights and responsibilities as written in the operating agreement — not just the managing member. That shared understanding is what keeps things from getting messy when someone needs to leave.
Steps to Remove an LLC Member in Texas According to the LLC's Operating Agreement
Drawing from my experience, to effectively remove a member in Texas, you should follow these steps:
- Consult the LLC's operating agreement.
- Apply the provisions of the operating agreement.
- In the absence of an operating agreement, the state allows the LLC to draft one as long as there is a unanimous vote from the company's members.
"To be successful in business, or in life, the things you acquire matter just as much as the things you let go."
- Jon Morgan, CEO & Editor-in-Chief of Venture Smarter
Voluntary Removal
Voluntary removal of LLC members isn't permitted under Texas law unless your operating agreement specifically includes a provision for it [1].
A voluntary withdrawal means the member has decided — or agreed — to exit the LLC entirely. Once that decision is made, the process outlined in the operating agreement kicks in. If that document doesn't spell out clear withdrawal procedures, voluntary dissolution of the LLC may become a real possibility.
In our own Texas LLC experience, voluntary removal was initiated by the remaining LLC members, who worked through each step laid out in the operating agreement. Having that document in order made a difficult situation much more manageable.
Usually, the operating agreement will specify the following:
- The conditions that must be met before a member can voluntarily withdraw (a majority vote, for example)
- Notice of withdrawal
- Buyout provision
- Distribution of withdrawing member's ownership interest
If there's no LLC operating agreement or if it doesn't address these matters, then state law will apply.
Unless your LLC operating agreement specifies otherwise, the departing member should send a written notice of resignation to the limited liability company.
Involuntary Removal
From my experience with Texas LLCs, involuntary removal follows a similar procedural path — but the reasons behind the removal change how complicated things get.
In some cases, you'll need a court order to compel a member to leave, which can lead to judicial dissolution if things escalate. That's a scenario you want to avoid if at all possible.
The reasons for the involuntary withdrawal of a member include:
- Failure to comply with the company's operating agreement
- Not contributing capital or performing services as agreed
- Wrongfully taking company property
- Committing a felony or other serious crime that adversely affects the LLC.
Filing Changes with the Texas Secretary of State
When removing a member from an LLC in Texas, it is necessary to notify the Texas Secretary of State. This involves submitting specific forms and ensuring accurate, up-to-date records.
The LLC must file a Certificate of Amendment with the Texas Secretary of State to update the company’s records. This form is used to update information, including changes to the registered agent or office address.
Additionally, the LLC may need to file a Notice of Termination to update the public records and ensure that the departing member no longer has any legal connection or responsibility within the LLC.
Keeping the Texas Secretary of State informed of these changes is crucial for maintaining the legal standing of the LLC and ensuring compliance with state regulations.
Steps after Removing an LLC Member
There are certain steps to follow after removing a member, regardless of whether the owner voluntarily withdraws or is expelled from the company.
- Notify the Texas Secretary of State as soon as possible
- Update the Texas LLC operating agreement and file an amendment on the LLC's formation documents.
- In our case, we also informed financial institutions such as banks and loan associations
Membership Change and Buyout Agreement for Member's Ownership Interest
A membership change can be settled through a buyout agreement — and honestly, that's the cleanest way to avoid a drawn-out dispute between owners.
A dismissed member's ownership interest in the LLC can be transferred to another member or sold to a third party.
If the member you want to remove holds a LLC managerial position, the provisions in the operating agreement still apply.
An ownership change in a Texas LLC can get complicated fast, but a well-structured membership change agreement makes the ownership transfer far less contentious. I've seen deals fall apart simply because this wasn't in place ahead of time.
This is worth getting right — especially in Texas, where according to the Texas Secretary of State, 89.48% of all new business entities formed in 2024 were LLCs. That's a lot of operating agreements that need solid ownership-change provisions baked in.
Related Articles:
- How to Apply for an LLC in Texas
- Texas Registered Agents
- Cost To Start An LLC In Texas
- Dissolving an LLC in Texas
Legal Considerations and Compliance
Removing a member from an LLC in Texas requires meticulous attention to legal procedures to ensure compliance with state laws and the LLC’s operating agreement.
Understanding the legal implications and seeking expert advice are crucial steps in this process.
An experienced business formation attorney can navigate the complexities of removing an LLC member and ensure that all procedures comply with statutory requirements.
It is essential to avoid legal pitfalls by following the LLC’s operating agreement and seeking legal advice when necessary.
Failure to comply with Texas law and the LLC’s operating agreement can lead to legal disputes and potential litigation.
LLC members can ensure a smooth and legally compliant removal process by adhering to the proper legal procedures and consulting with a knowledgeable business attorney.
FAQs
How Do I Remove a Manager from My LLC in Texas?
To remove a manager from your LLC in Texas, the members will need to adopt a resolution and notify the manager of the removal.
If your LLC is member-managed, any member may vote to remove a manager with or without cause.
How Do I Remove a Member from a Texas LLC with the IRS?
To remove a manager from your LLC in Texas, the members will need to adopt a resolution and notify the manager of the removal.
If your LLC is member-managed, any member may vote to remove a manager with or without cause.
How Do You Notify the IRS of a Change of Ownership of a Single-Member Texas LLC?
To notify the IRS of a change of ownership of a single-member Texas LLC, you should submit Form 8822-B, and a new Responsible Party must be designated.
File this form with the IRS no later than 60 days after you establish a new LLC membership structure.
What Is the Role of the Texas Secretary of State in the Removal of a Member From an LLC?
Under Texas LLC law, the Secretary of State doesn't play a direct role in the removal of a member from an LLC. However, changes regarding the departing member's interest might require filing amendments to the formation documents with the Secretary's office.
Removing an LLC member in Texas means following your operating agreement closely and staying compliant with state regulations throughout the process. At VentureSmarter, our recommendation is straightforward: don't try to do this without a legal professional in your corner. The paperwork is manageable — the liability if you get it wrong is not.
References:
- https://statutes.capitol.texas.gov/Docs/BO/htm/BO.101.htm
