Texas LLC governance: the default splits your company by a number nobody wrote down

Texas splits an LLC the way most people would expect. Profits, losses, and distributions go to each member according to the agreed value of what that member contributed. A member who put in $90,000 and one who put in $10,000 divide things ninety and ten.

Then read the rest of the sentence. Both statutes measure that contribution “as stated in the company’s records,” and Texas separately requires the company to keep those records. So the sensible Texas default points at a document, and in most small LLCs that document does not exist. The default does not fail loudly. It just turns an ownership question into a fact fight between two people’s memories.

Texas’s default is only as good as the contribution records the statute assumes you kept.

What the statute decides when you say nothing

The split follows the money, on paper

Tex. Bus. Orgs. Code § 101.201 allocates profits and losses on the basis of the agreed value of the contributions made by each member, as stated in the company’s records required under § 101.501. Section 101.203 does the same for distributions of cash and other assets.

Texas divides profits and distributions by contributed value, not in equal shares.

That places Texas with Nevada and Alaska and against Wyoming, South Dakota, and Florida, which all default to equal shares regardless of who funded the company. A Texas majority investor is not ambushed by an equal-split rule. The Texas exposure is different and quieter: the formula needs an input.

The records the formula runs on

Section 101.501 requires a Texas LLC to keep supplemental records, and the contribution figures the allocation statutes reference live there.

Write down the agreed value of every contribution when it goes in, because the statute allocates by that number and nothing else.

Bob contributes $10,000, Becky contributes $100,000, and the records say so: Bob holds about 11%, and every distribution, allocation, and vote follows from it. Now delete the records. The statute still says to allocate by agreed contribution value, but there is nothing to read, and the answer becomes whatever the parties can prove years later, usually in front of a judge who was not there. Recording contributions costs nothing at the time and everything afterward. Do it at the moment money or property goes in, and update it every time someone contributes again.

There is no way out unless you build one

Texas takes a firm line on exits, and it surprises people who assume they can simply leave.

A Texas LLC member has no default right to withdraw and no default power to expel anyone.

Section 101.107 is titled for exactly this: withdrawal or expulsion of a member is prohibited. Texas gives no statutory exit ramp. A member who wants out of a Texas LLC has whatever the company agreement provides, and if the agreement provides nothing, the practical answer is a negotiation with the people who have no obligation to negotiate. That makes buy-sell terms, valuation methods, and triggering events more load-bearing in Texas than in states with a default withdrawal right. It also means a falling-out with no agreement in place locks everyone in place together.

How far you can contract around it

Broadly. Texas is a contractarian state: § 101.052 lets the company agreement govern the company’s affairs and the members’ relations, and the statute yields to it on most questions. Section 101.054 sets out the short list of provisions the agreement may not waive or modify, and that list is the boundary worth reading before drafting anything aggressive.

The practical Texas advice is narrower than the general freedom suggests. The agreement should state ownership percentages outright rather than relying on the contribution records, so the two never disagree. It should build the exit that § 101.107 withholds. And it should say what happens when someone contributes more later, because in Texas an unrecorded second contribution can quietly rewrite everyone’s share. The freedom of contract and default rules pages cover the wider model.

The bottom line

Texas allocates profits, losses, and distributions by the agreed value of each member’s contribution, not in equal shares.

Both allocation statutes measure that value by what the company’s records say, and § 101.501 requires those records to exist.

An LLC with no contribution records has a default formula with no input, which turns ownership into a fact dispute.

Section 101.107 gives no default right to withdraw and no default power to expel, so exits must be drafted or they do not exist.

Texas is broadly contractarian, with a short non-waivable list in § 101.054, so the company agreement carries nearly all the weight.

State ownership percentages in the agreement itself, and record every contribution as it goes in.

What this page does not cover

This page is about what Texas law lets your company agreement do. How creditors reach you, including the charging order and the forfeiture trapdoor, is on the protection page. The franchise tax, series LLCs, and the absence of a transfer tax are on the structure and cost page. The May 15 filing and reinstatement are on the filing page.

Last verified July 2026.