How to Buy Out Your LLC Partner in Texas

Updated: September 16, 2026

Problems with a partner? You are not alone. Our firm routinely hears from business owners who want to part ways with a partner who is inactive, engaging in unethical or illegal behavior, or otherwise disrupting operations.

Here are just a few recent inquiries we’ve received from concerned business owners:

“I have a dispute with a business partner. I want him out of the company … I do everything without him contributing to the business.”
“I have a business partner who owns a 5% interest in the company. He wants me to buy him out but wants more than I think he should get. We are currently negotiating.”
“My partner and I own a small company together. I would like to be bought out, but we can't agree on the price.”
"I've recently discovered that my partner has been embezzling money from our company. I need to know how to approach this situation.”
“I put up the money and credit for the company. Now, one partner wants to be bought out – but all they do is answer phones.”

Whether you want out or want your partner out, the answer begins with your operating agreement.

If you have an operating agreement that addresses buyouts, it controls what happens next. The agreement sets what triggers a buyout, how the interest is valued, and how the buyer pays for it.

If you are operating without an agreement, Texas law fills the gap, and its default rules are restrictive. No member can withdraw and demand payment, no member can be forced out, and no court can order one member to buy another's interest. That leaves a negotiated deal or, failing that, dissolution.

Buyouts With an Operating Agreement

If you want to buy out a partner (or vice versa), look for a buy-sell provision in your operating agreement that addresses:

Buyout triggers – circumstances that allow or require a buyout, such as voluntary resignation, death, disability, retirement, or expulsion for cause
Valuation methods – how the business and the departing member's interest will be valued, whether by a set price, a formula based on book value or earnings, or an independent appraisal
Payment terms – whether payment comes as a lump sum, in installments, or through a promissory note with interest over a set number of years
Right of first refusal – a requirement to offer the departing member's interest to the remaining members before outside buyers
Restrictions on transfers – limits on selling membership interests to third parties, including notice requirements
Funding – how the buyout will be paid for, such as a life insurance policy that provides cash when a triggering event occurs

If your agreement allows a member to withdraw, state law entitles that member to receive the fair value of their interest within a reasonable time after withdrawal.

Texas courts enforce these provisions strictly. If your agreement requires notice to every member before a transfer, skipping a member can invalidate the transfer. If it gives a family member an option to buy a deceased member's interest at a set price, a court can enforce that price even when the interest is worth more.

Deadlines matter too. In Crain v. Northern (2026), the Texas Business Court ordered a 50% member to sell his interest at the offered price after he failed to respond within the 30-day window his agreement required. The court also awarded attorney's fees.

Work with an attorney to follow your agreement's terms exactly. An LLC operating agreement is an enforceable contract, and if your partner refuses to comply, you can ask a court to enforce it.

Buyouts Without an Operating Agreement

If your operating agreement lacks removal or buyout provisions, or if you do not have one, Texas law does not supply a default buyout process. A member cannot withdraw and demand payment, and the other members cannot force a member out.

That leaves three practical paths:

Negotiate a voluntary buyout. This is the most common outcome, and usually the best one. A negotiated deal lets you set the price, structure the payments over time to protect the company's cash flow, decide who takes on which obligations, and release personal guarantees. It also keeps the outcome in your hands. The tradeoff is that it takes agreement, so a member who refuses to sell cannot be made to.
Ask a court to dissolve the LLC. A member can petition a court to wind up and terminate the company. The court must find that the economic purpose of the business is likely to be unreasonably frustrated, that another owner's conduct makes it not reasonably practicable to continue with that owner, or that it is not reasonably practicable to operate under the company's governing documents. If you want to keep the business running, this is the outcome to avoid.
Ask a court to appoint a receiver. A receiver is a neutral third party the court puts in charge of the company. This remedy is available only in limited circumstances: the members must be deadlocked and unable to break the deadlock, the business must be suffering or facing irreparable harm as a result, and other remedies must be inadequate. Texas courts treat receivership as a harsh, temporary measure rather than a way to resolve a buyout. A receiver may keep the business running while the underlying dispute is worked out, but neither member controls it in the meantime.

If your partner has broken the law or breached a duty to the company, you may also have legal claims for financial damages. Those claims do not remove your partner on their own, but they can affect the buyout price: There is some case precedent for misconduct leading to the forfeiture of the right to receive fair value. If damages are awarded, you may be able to recover that money from what that member would otherwise receive in a negotiated buyout.

If your working relationship has gone beyond a face-to-face discussion, bring in experienced legal counsel to facilitate negotiations or engage in professional mediation.

Working With an Attorney to Negotiate a Voluntary Buyout

If conversations between partners stop being productive, attorneys on each side can help move the discussion forward. An attorney can:

Clarify each party's rights and risks under Texas law. Many members do not realize that, unless the operating agreement says otherwise, state law prohibits both withdrawals and expulsion. Neither of you can simply walk away from your duties to the LLC or force the other out. Outside of litigation, you must reach a buyout agreement, and negotiation keeps that decision in your hands rather than a judge's.
Propose a neutral appraiser or a valuation method both sides accept. See the next section for more on setting a fair value.
Draft a settlement agreement that covers more than price and payment terms, including the transfer of management responsibilities and decision-making authority, non-compete and non-solicitation restrictions, and indemnification for past actions and future liabilities.

After the buyout, your attorney can update your operating agreement and company records to reflect the new ownership and handle any required state filings, such as a change in registered agent.

Working With a Professional Mediator

If informal negotiations stall, your attorney may recommend mediation. Mediation gives both sides a structured setting to explore buyout options with the help of a neutral third party.

A mediator does not decide who is right. The mediator's job is to keep the conversation moving, test each side's assumptions privately, and surface terms both members can live with. That matters in a buyout, where the sticking point is usually valuation, payment timing, or who keeps the client relationships – not who broke the rules.

If you reach an agreement, your attorneys put the terms in writing that day. A signed mediated settlement agreement is binding, and it becomes the framework for your buyout and transfer documents.

If you don't reach an agreement, you can ask the courts to intervene.

Court-Ordered Dissolution and Receivership

If negotiation and mediation fail, a lawsuit may be the next step. Under state law, a court can order the winding up and termination of an LLC when one of three grounds is proven:

The economic purpose of the entity is likely to be unreasonably frustrated.
Another owner has engaged in conduct that makes it not reasonably practicable to carry on the business with that owner.
It is not reasonably practicable to carry on the business in conformity with its governing documents.

The burden of proof is high. Courts do not dissolve an LLC simply because members disagree or want to part ways. The member asking for dissolution must present strong evidence, such as a true deadlock, serious misconduct, or a fundamental breakdown in operations. In Holdridge v. Wallace Ryne, O.D., P.C. (2024), a Texas appeals court reversed a dissolution order because evidence of interpersonal conflict and a toxic workplace, without proof the business could not fulfill its purpose, was not enough.

Dissolution is not the only statutory remedy. A court can also appoint a receiver (a neutral third party who takes control of the business) to rehabilitate the LLC. It can do so only if the members are deadlocked, cannot break the deadlock, and the business is suffering or facing irreparable harm as a result, and only if other remedies are inadequate. Texas courts treat receivership as a harsh, temporary remedy.

What a court cannot do is order one member to buy out the other, and you may end up with a dissolved business instead of the one you wanted to keep. This makes litigation risky even when your position is strong.

Setting a Fair Value for a Departing Member's Interest

Setting a price is where most buyout negotiations stall. One member believes the business is worth what they could sell it for tomorrow. The other believes it is worth what is in the bank today.

If your operating agreement sets a valuation method, that method controls. It may specify a set price, a formula, or an independent appraisal. Some agreements also let a member who disputes the first valuation obtain a second opinion from an independent appraiser. Check whether yours does before you accept a number.

In the absence of an operating agreement, members must voluntarily agree on a valuation approach or litigate. Texas law does not have a default valuation method.

Before you litigate, consider delegating the decision to a neutral appraiser. A qualified third party takes the emotion out of the discussion, uses widely accepted valuation methodologies, and costs far less than litigating the question.

If it does come to litigation, you may still end up in the hands of an independent appraiser. Texas courts often appoint an accountant to provide a valuation and allow Texas juries to settle on an acceptable value when methodologies conflict.

When Ownership Percentages Are in Dispute

Before anyone can assign a value to an ownership interest, both sides have to agree on who owns what. In LLCs without a written agreement, that is often the real fight.

The company's records control. Unless your operating agreement says otherwise, ownership percentages are allocated based on the agreed value of each member's contributions as stated in the company's records. Texas law also requires an LLC to keep a written record of what each member contributed. Where no operating agreement exists, internal records become the only measure of each member's ownership share.

Sweat equity counts when it goes beyond mere employee services. Services rendered, or “sweat equity”, are legally recognized as valid contributions under Texas law, but they must be documented in writing with an agreed value, must benefit the LLC beyond serving in an employee capacity, and must be recorded in the company's records. Without that, a member who contributed only sweat equity has little or no evidence to support ownership claims.

Call (713) 783-3110 or contact us online to discuss what the records in your business actually show.

The High Cost of No Operating Agreement

Think of an LLC as a contractual arrangement between members. Just as you need a written agreement between you and a supplier or contractor, you should also have one between you and the other LLC members. Texas law gives LLCs wide leeway to set their own rules through an operating agreement. Without one, members must rely on limited state laws that do little to address the complexities of a business dispute.

If you do not have an operating agreement, work with an attorney to create one tailored to your LLC and its members, ideally when you form the company or before a dispute arises.

Get Legal Help With LLC Partner Buyouts in Texas

Your options depend on what your operating agreement says and what has happened between you and your partner. Since 1987, Hendershot Cowart P.C. has helped Texas business owners form LLCs, draft operating agreements, and resolve LLC member disputes when those relationships break down. Whether you need a new operating agreement, a review of existing buyout provisions, or help with an active dispute, we explain your options in plain English.

Do not wait until more damage is done.

Call (713) 783-3110 or contact us online to discuss your rights as an LLC member.