Many Texas companies start with two or three owners who trust each other. Years later, one owner has stopped contributing, a family relationship has broken down, or the members disagree about where the business is going. The question then becomes: can the rest of us vote this person out?
Under Texas law, the answer usually depends on a document many owners haven't read since the company was formed: the company agreement, often called the operating agreement.
The Default Rule: Members Can't Be Expelled
Section 101.107 of the Texas Business Organizations Code states the default rule plainly: a member of a limited liability company "may not withdraw or be expelled from the company."
That rule is only a starting point. Under Section 101.052, the company agreement governs the relations among the members and the company's internal affairs. Most provisions of the LLC statute can be changed in the agreement, subject to the limited list of exceptions in Section 101.054. In practice, this means:
- If the company agreement has an expulsion or forced-buyout provision, the members may be able to remove a member by following it exactly: the triggering events, notice, any cure period, the required vote, and the valuation and payment terms.
- If the agreement is silent, or there is no written agreement, a majority vote alone generally does not remove a member.
The agreement also can't simply be rewritten mid-dispute. Section 101.053 requires the consent of every member to amend the company agreement unless the agreement itself provides a different process.
Removing a Manager Is Different From Removing a Member
Owners often blur two separate roles. A member owns an interest in the company. A manager (in a manager-managed LLC) runs it. Under Section 101.304, a manager may be removed, with or without cause, at a meeting of the members called for that purpose, subject to any class-voting rights in Section 101.306 and to the company agreement.
Removing someone as manager takes away that person's management authority. It does not take away the person's ownership, right to distributions, or right to inspect records. For many businesses, the practical first step is to change who controls day-to-day decisions, and then address ownership separately.
Your Options When the Agreement Doesn't Allow Removal
Negotiate a buyout
A negotiated purchase of the departing member's interest is often the cleanest result. It keeps the business running and puts a price and a release in writing. A buyout agreement should address the purchase price and how it was set, the payment terms, the treatment of member loans and guarantees, tax allocations for the year of the sale, any non-solicitation or confidentiality terms, and mutual releases.
Use the buy-sell or transfer provisions you already have
Many agreements include rights of first refusal, buy-sell triggers (death, disability, divorce, departure from employment), or deadlock procedures. These provisions may give the company or the other members a path to buy the interest even if the agreement has no expulsion clause.
Ask a court to wind up the company
When the relationship has truly broken down, Section 11.314 lets a district court in the county of the company's registered office or principal place of business order the winding up and termination of an LLC, on application of an owner, if the court determines that:
- the company's economic purpose is likely to be unreasonably frustrated;
- another owner has engaged in conduct relating to the business that makes it not reasonably practicable to carry on the business with that owner; or
- it is not reasonably practicable to carry on the business in conformity with its governing documents.
Winding up ends the company for everyone, so it is usually a last resort.
Receivership in limited circumstances
Section 11.404 allows a court to appoint a receiver to rehabilitate an entity in narrow situations, including management deadlock causing irreparable injury, illegal, oppressive, or fraudulent conduct by those in control, or misapplication or waste of company property. The statute requires that other remedies be inadequate.
Claims for damages
If a member or manager has diverted funds, competed with the company, or otherwise caused harm, the company or the other members may have claims for breach of the company agreement or breach of duties owed to the company. The company agreement can expand, restrict, or eliminate certain duties under Section 101.401 (amended in 2025), so the agreement must be read closely before any claim is evaluated. In a closely held LLC (fewer than 35 members and no publicly traded interests), Section 101.463 relaxes several procedural requirements for derivative claims, and a court may treat a derivative claim as a direct one if justice requires.
What Not to Do
When owners are at odds, self-help can make a manageable dispute expensive. Before talking with counsel, avoid:
- locking a member out of the company's bank accounts, email, or offices without clear authority;
- treating a disputed expulsion as complete, or reissuing that member's interest to others;
- withholding distributions or information in a way the company agreement does not allow; and
- deleting, moving, or "cleaning up" company records.
Remember that members generally have a right, on written demand stating a proper purpose, to examine and copy company records reasonably related to that purpose under Section 101.502, and the company agreement may not unreasonably restrict that right.
Where These Disputes Are Heard
Most disputes among owners of smaller companies are heard in state district court. Texas's Business Court, created under Chapter 25A of the Government Code, can hear governance and internal-affairs disputes that exceed a statutory amount-in-controversy threshold, or regardless of amount if a publicly traded company is a party.
How TMF & Associates Helps
TMF & Associates advises Texas business owners on company agreements, buy-sell provisions, and ownership disputes, and our attorneys have extensive trial experience when a dispute cannot be resolved by agreement. Our approach is practical. We start with the governing documents, identify the realistic options, and look for a resolution that protects the business, while preparing for litigation if it becomes necessary. Learn more about our Business Law and Entity Formation practice.
Frequently Asked Questions
Can a member of an LLC be removed in Texas?
Only if the company agreement provides a way to do it, or the member agrees to leave, for example through a buyout. Texas's default rule in Section 101.107 is that a member may not be expelled.
How do I remove a managing member from an LLC in Texas?
If the person serves as a manager, Section 101.304 allows members to remove a manager at a meeting called for that purpose, subject to the company agreement. That removes management authority but not ownership.
Can I withdraw from an LLC in Texas?
Not under the default rule. A member may leave if the company agreement permits withdrawal or if the other members agree to buy the interest or approve a transfer.
Can a member of an LLC sue the LLC?
A member may have claims to enforce rights under the company agreement or the statute, such as the right to inspect records. Claims for harm to the company are generally brought on the company's behalf as derivative claims, subject to the closely held LLC rules in Section 101.463.
Talk With a Texas Business Law Attorney
If you are facing a disagreement among the owners of your company, call TMF & Associates at (281) 296-6500 or reach us through our contact page. Our office is at 24900 Pitkin Road, Suite 110, in The Woodlands.
This article is for general information only and is not legal advice. Reading it or contacting our firm does not create an attorney-client relationship. Every matter depends on its own facts, and the law may change after publication. Consult a lawyer about your specific situation.