Read both management documents
A Texas LLC’s certificate of formation may state that the company has managers while an internal agreement describes member management. A bank may rely on an old certificate, and employees may follow whichever founder gives instructions most often. Before approving a significant contract, reconcile the company agreement, certificate and current appointments. The person with the largest economic interest is not necessarily the person authorized to act for every company purpose.
Texas Business Organizations Code section 101.251 identifies the governing authority using the company agreement and, when it does not provide otherwise, the certificate’s management statement. The company should therefore retain both documents and explain the current structure. A formation filing is not a complete substitute for reading the operative agreement.
Test the authority against a proposed commitment
Suppose three members hold 50%, 30% and 20% economic interests, while the agreement appoints two managers. The founder holding 50% wants to sign a $300,000 service contract with a required $50,000 deposit. The ownership percentages do not themselves show whether that founder may approve or sign the contract. The managers’ authority, reserved matters and applicable voting requirements need to be identified first.
For cash planning, the deposit is $50,000, but the legal commitment may be $300,000. An internal approval policy based only on the initial payment could miss the full obligation. Prepare an authority worksheet that identifies the contract amount, approving body, vote required and authorized signer. The example does not determine the contract’s enforceability; it shows why economic ownership and signing authority belong in separate columns.
Maintain a current governing-authority roster
List managers, members with management powers, officers and delegated signers, together with effective dates and source documents. Preserve appointment and removal records. If a manager resigns, identify the vacancy process and update the roster rather than leaving that person on bank forms indefinitely. A title used in customer communications should not be the only evidence of authority.
Compare the roster with bank access, payment approvals and vendor records. A person may remain an owner after losing authority to sign contracts, or become an authorized officer without receiving equity. Make those distinctions visible to staff. If a certificate or other public filing needs updating, assign the task and retain the accepted filing. Do not assume an internal resolution automatically changes information held by outside parties.
Resolve inconsistencies before issuing an authority certificate
When a lender or counterparty requests an incumbency or authority certificate, verify the statements against the current documents. Identify whether the signer is certifying manager status, officer status, member approval or a particular delegation. A certificate that simply says the founder is authorized can conceal the absence of a required vote. Attach or reference the completed resolution where appropriate.
If the documents conflict or an agreement’s adoption is disputed, preserve the competing records and resolve the issue through the proper process. Do not choose the version that makes the pending transaction easiest to close and discard the rest. The company needs a defensible chronology of formation, agreements, amendments and appointments. That chronology also helps explain past actions that may need separate ratification or other corrective analysis.
Give operating staff a practical authority map
Create a concise map showing routine powers, reserved decisions, financial limits and the person responsible for keeping it current. Review it when ownership, management or financing changes. The map is an operating aid supported by the governing documents, not a replacement for them. Staff should know when to escalate a contract instead of treating every founder instruction as sufficient approval.
This article does not determine apparent authority, bind a third party to an internal limitation or validate a particular disputed agreement. Those questions require the transaction facts and applicable law. It focuses on the Texas governing-authority framework and the need to reconcile the actual documents before representing who can act. A consistent agreement, roster and external authority record can prevent a financing or procurement decision from becoming a dispute over whether the right person signed. Recheck the map before new borrowing, substantial procurement and any change in the company’s appointed managers or officers.
Sources & further reading
Consult the original guidance and its effective dates. These references support the educational discussion; their application depends on the specific facts.