How to Remove a Member From an LLC in Texas? (Full Guide)
Texas law’s default rule says an LLC member may not withdraw or be expelled. The Texas Business Organizations Code, Chapter 101 also lets a company agreement modify many rules, so the current agreement and its approval process can change the result [1] [2].
Removing someone as a manager is different from ending that person’s membership; a former manager may still own part of the LLC. Before acting, review the current company agreement, certificate of formation, member records, and transfer documents, and get Texas legal advice if the procedure is disputed.
Quick Summary
- Check the company agreement for withdrawal or expulsion grounds, voting rules, notice, buyout terms, valuation, and a chance to respond.
- Texas’s default rule bars member withdrawal or expulsion; the company agreement may change that rule if validly adopted and followed.
- An assignment can transfer economic rights without making the buyer a member or giving the buyer management rights [3].
- Removing a manager changes management authority; it does not by itself cancel the person’s ownership.
- Record a valid ownership change inside the LLC and update state management records when required.
Member and Manager Are Different Roles
A member owns an LLC interest, while a manager directs the company’s business under the company agreement and Texas law. One person may hold both roles, or a manager may have no ownership [4].
The certificate of formation identifies whether the LLC initially has managers; see the Texas Secretary of State Form 205 instructions for the state’s filing instructions. Our LLC member guide and LLC manager guide explain the distinction in more detail.
When a Member Wants to Leave
Read the current company agreement for a withdrawal right, notice period, purchase option, approval requirement, and valuation method. Texas’s default statute prohibits withdrawal, but the agreement can modify that rule subject to limits in Section 101.054 [5].
If the agreement grants a valid withdrawal right, the departing member is entitled to fair value within a reasonable time, measured as of the withdrawal date [6]. Follow the agreement’s valuation process and use current financial records; Texas law does not create one universal buyout formula.
If there is no usable exit provision, do not assume the other members can force a departure by majority vote. Negotiate a written transfer or buyout, or ask a Texas business attorney to assess the options before changing the member’s access or rights.
When the Other Members Want to Remove Someone
Check whether the company agreement expressly permits expulsion and identify the trigger, decision maker, vote, notice, opportunity to respond, and buyout terms. Do not treat a general majority vote as authority unless the agreement and applicable law support that exact process.
Follow the required steps and keep the notices, vote, reason, valuation, and effective date in the company records. Get legal advice if the agreement or ownership history is unclear, and avoid locking someone out of company property or withholding distributions without advice.
If only the management role is changing, follow the separate manager-removal process in the agreement and Texas law [7]. Removing a manager does not automatically end that person’s membership.
An assignee may receive assigned distributions and allocations, but the transfer alone does not make the assignee a member. Admission generally requires approval of all members unless the company agreement provides a different rule [8].
What to Update After an Ownership Change
Put a valid withdrawal, expulsion, redemption, or buyout in a signed writing. State what rights change, the effective date, price or valuation method, payment terms, and continuing guarantees or liabilities; then update the company agreement and member ledger.
The Texas Secretary of State’s ownership-change FAQ says there is no Texas filing solely for an LLC ownership change. If the change affects publicly reported managers, the Texas Secretary of State’s management-information FAQ explains how to update those records.
Update bank signers, lenders, insurers, licenses, contracts, and tax records when their rules or agreements require it. A change in owners can affect federal tax treatment, so review the IRS LLC tax-classification guidance and confirm any EIN or return requirements.
If the members decide to close rather than continue the business, review the company agreement and Texas termination steps first. Our Texas LLC dissolution guide explains that process.
Document a Buyout or Transfer Carefully
A buyout or assignment should say whether the buyer receives economic rights, voting rights, management authority, or full membership; those rights do not necessarily move together. Put the effective date, price or valuation method, payment schedule, and responsibility for distributions, taxes, guarantees, and other obligations in writing.
Have the agreement reviewed before signing when the parties dispute value, continuing liabilities, or tax treatment. Keep the signed transfer and updated member ledger with the company’s permanent records.
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FAQs
How Do I Remove a Manager from My LLC in Texas?
First confirm whether the person is a manager, member, or both. Follow the company agreement and the separate manager-removal process; removing a manager alone does not end ownership.
How Do I Remove a Member from a Texas LLC with the IRS?
A member change follows the company agreement and Texas law; no IRS approval is needed for the LLC’s internal ownership decision. After the change is valid, review any federal tax-classification, EIN, or return consequences.
How Do You Notify the IRS of a Change of Ownership of a Single-Member Texas LLC?
Use the IRS guidance on when to get a new EIN to check the transaction. Adding or removing an owner can change the LLC’s federal tax treatment, so confirm the filing duties for the new ownership structure [9].
What Is the Role of the Texas Secretary of State in the Removal of a Member From an LLC?
The Secretary of State maintains some public management information but does not decide an LLC’s internal ownership dispute. The linked state guidance above explains when management records should be updated.
References:
- https://statutes.capitol.texas.gov/?artSec=101.107&chapter=BO.101&code=BO&tab=1
- https://statutes.capitol.texas.gov/?artSec=101.052&chapter=BO.101&code=BO&tab=1
- https://statutes.capitol.texas.gov/?artSec=101.108&chapter=BO.101&code=BO&tab=1
- https://statutes.capitol.texas.gov/?artSec=101.302&chapter=BO.101&code=BO&tab=1
- https://statutes.capitol.texas.gov/?artSec=101.054&chapter=BO.101&code=BO&tab=1
- https://statutes.capitol.texas.gov/?artSec=101.205&chapter=BO.101&code=BO&tab=1
- https://statutes.capitol.texas.gov/?artSec=101.304&chapter=BO.101&code=BO&tab=1
- https://statutes.capitol.texas.gov/?artSec=101.109&chapter=BO.101&code=BO&tab=1
- https://www.irs.gov/businesses/small-businesses-self-employed/when-to-get-a-new-ein
