What does a Texas operating agreement cost? This is a common question for anyone in Texas looking to start a new limited liability company. So let’s explore this question and review some general information about LLC operating agreements.
How Much Does a Texas Operating Agreement Cost?
An operating agreement is a legal document that outlines the rules and procedures for how a Limited Liability Company (LLC) will run. Operating agreements should include key information about:
- The business-like management structure
- The daily operations
- Governance
- Investments
- Taxes
- Profit sharing
Texas laws do not require members of an LLC to have or file an operating agreement with the state. However, it is highly recommended that a business drafts an operating deal anyway.
An LLC operating agreement outlines business policies and will protect a business owner’s assets from any business liability.
Benefits of having an operating agreement include:
- Clear set of company policy and procedure
- Liability protection
- Tax benefits
- Conflict resolution
Hiring a lawyer who has experience drafting operating agreements is highly encouraged. An attorney will know how to custom tailor an operating agreement to fit your business’s needs while protecting the owners and members from business liability.
The cost of an operating agreement will vary depending on the length and complexity of the document and the number of custom terms included.
Based on ContractsCounsel’s marketplace data, the average cost of a project involving a Texas operating agreement is $478.75.
What’s Included in a Texas Operating Agreement?
Every business is different, and operating agreements will reflect those differences. These documents will vary based on the size and organization of the LLC and whether it is a single-member LLC or a multi-member LLC.
Despite these differences, a standard Texas operating agreement should include the following terms:
- Organization. The organization details the creation of the company. It includes the date the company was established, a Texas address for the company, the names of all members, and the ownership structure.
- Management. An LLC management structure is set up as either a member-managed LLC or a manager-managed LLC. The structure should be evident in the operating agreement.
- Voting. Each member of the LLC will have voting rights for making decisions within the company.
- Capital Contributions. This clause is only used for a multi-member LLC, and it is a record of how much capital each member contributed to start the LLC.
- Distributions. Distributions refer to how the company’s profits and losses are distributed among the members or owners. Profits and losses include actual money, property, or business assets.
- Membership changes. The operating agreement should include rules for adding and removing members, transferring membership, and what happens if a member dies.
- Dissolution. The dissolution section outlines the ways a company can be dissolved.
- Signatures. Each member must agree to and sign the operating agreement. The agreement should be on file in a safe place and accessible to all members.
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Who Needs an LLC Operating Agreement?
In Texas, LLC owners are not legally required to have an operating agreement. However, many LLC members still choose to draft an agreement when forming a new LLC.
An operating agreement is a legally binding contract outlining how the company will be governed and operated. For a multi-member LLC, operating agreements are especially important. The operating agreement will define the roles and responsibilities of each member.
Texas LLC Annual Report
Texas LLCs are not required to file an operating agreement with the state. Still, they must file an annual Public Information Report and Franchise Tax. These reports are filed with the Office of the Comptroller regardless of the business’s activities or income.
The franchise tax will vary by industry, but it is typically 1% of gross receipts over one million dollars. These reports are due annually on May 15th.
Texas Operating Agreement Projects
Operating Agreement Drafting in Texas
It is common for Texas business owners will hire an experienced to draft their Texas LLC operating agreement. Operating agreement drafting usually involves consultation between the lawyer and the LLC partners.
The lawyer will learn about the business and the terms the members want to include in an operating agreement.
After the initial consultation, the lawyer can draft an operating agreement that includes all the terms required for the business to run efficiently and follows all Texas laws.
Operating agreement costs can vary based on the document's length and complexity and the number of custom terms the partners wish to include.
Operating Agreement Review in Texas
Some business owners already have an operating agreement but need a lawyer to review the document before they use it for their company. A few reasons that the members of an LLC may want to hire a lawyer for document review include:
- To review an operating agreement, the members drafted themselves
- To update an existing operating that needs new terms or conditions due to changes or growth in the company
- An LLC member is hesitant to sign an operating agreement and wants their lawyer to review it to ensure they understand the terms and conditions.
- To ensure the operating agreement is up to date and complies with all current Texas laws.
Texas Operating Agreement Drafting Cost
Hiring an attorney in Texas to draft an operating agreement will incur legal fees because it requires the time and expertise of a licensed lawyer to complete the project.
ContractsCounsel’s marketplace data shows the average operating agreement drafting costs in Texas are $506.67.
Texas Operating Agreement Review Cost
Hiring a lawyer to review an operating agreement will also come with fees. However, they are generally less than drafting fees. The attorney will take time to consult with the partners, read over the operating agreement, and make suggestions for revisions.
ContractsCounsel’s marketplace data shows the average operating agreement review costs in Texas are $395.00.
How Do Lawyers in Texas Charge for an Operating Agreement?
Hourly Rates for Operating Agreements in Texas
Hourly rates are the most common way Texas lawyers charge for their time. In this fee arrangement, the lawyer will charge the client a set hourly rate for the time spent completing the project.
This method of billing has both positives and negatives. Attorneys benefit from ensuring they are compensated for every minute of their time. Still, they usually must wait until the end of a project to receive payment.
Clients, although they are informed of the hourly rate, they don’t know the full cost of their legal fees until the completion of the project, which can sometimes end up being more expensive than anticipated.
ContractsCounsel’s marketplace data shows that the average hourly rate for a business lawyer in Texas ranges from $200 - $350 per hour.
Flat Fee Rates for Operating Agreements in Texas
Some lawyers use a flat fee rate billing method for contract drafting. In this fee arrangement, the lawyer will quote a lump sum rate for the project's cost, usually to be paid upfront.
From the client’s perspective, a flat fee billing structure is usually more desirable because they know exactly what they are charged for legal services. However, it is important to make sure the client knows what’s included with the fee before starting the project, as it may not include rounds of revisions or consultations.
ContractsCounsel’s marketplace data shows the average flat fee rate for an operating agreement in Texas is $478.75.
Get Help with an Operating Agreement in Texas
Do you need help with a Texas operating agreement project? If so, post a project in ContractsCounsel’s marketplace to receive flat fee bids from business lawyers who are licensed to practice law in Texas. All lawyers on the ContractsCounsel’s platform are vetted by our team to make sure you are provided with top tier service.
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