Texas Business Court Upholds Contractual Freedom in LLC Agreements

May 22, 2025 - 04:57

A recent decision from the Business Court of Texas, Eighth Division (Fort Worth), underscores that an LLC’s company agreement can effectively eliminate fiduciary duties between its members and managers. This ruling highlights the importance of contractual autonomy within limited liability companies, allowing members to define their relationships and obligations through their agreements.

In this case, a member of the LLC claimed that the other members had breached their fiduciary duties. However, the court determined that the operating agreement explicitly waived such duties, reinforcing the principle that parties in an LLC can tailor their agreements to suit their specific needs. The court emphasized that as long as the terms are clearly outlined in the operating agreement, members are free to establish the extent of their responsibilities and liabilities.

This decision serves as a reminder for LLC members to carefully draft their operating agreements, ensuring that their intentions are clearly articulated to avoid potential disputes in the future. The ruling also reaffirms the legal system's support for the freedom of contract, allowing business entities to operate according to their unique arrangements.