How Do I Remove a Member from an LLC?

Reasons for Removing Someone From an LLC

There are several reasons why you might want to remove someone from an LLC:

• Your member has not paid their LLC dues.
• Your member has violated the operating agreement.
• Your member is no longer completing work or responsibilities of your LLC.
• Other members have reported unsatisfactory performance and/or behavior about your member.

Reasons for Removing Yourself From an LLC

• You want to start your own new business.
• You no longer want to work with your business partners.
• You have decided to sell your share of a business, particularly, if you originally invested with the intent to exit at some point.
• You're moving away.
• You're retiring.

How to Remove Yourself from an LLC

Regardless of the reasons for removing yourself or others from an LLC, the good news is that it can be done. The first step you need to take is to read through the Articles of Organization that you put together when the LLC was officially registered. There should be verbiage in your agreement detailing the procedure for voluntary or involuntary withdrawal of a member.

When you remove yourself or others from an LLC, you will need to follow a series of steps:

1. Determine if the Articles of Organization specify a process that must be followed to remove yourself as a member.
2. Complete the steps listed in the Articles of Organization. Or in the absence of a written agreement between members of the LLC, research the requirements outlined by your state and complete those. Your LLC’s Articles of Organization supersede state statutes, so use the Articles of Organization as the first place to look, and make sure you are following the correct set of directives.
3. Provide written notification to the LLC of your intent to remove yourself.
4. Receive what interest in the company you are due. (The other members are required to buy you out in line with the Articles of Organization and your share of ownership in the business.)
5. Notify the relevant state regulatory authorities (usually the Secretary of State’s office) of your withdrawal from the LLC.

Once you have been removed from the LLC, it is business as usual for the remaining members; your responsibility to the LLC ends with your removal. After you have been bought out and received your interest in the LLC, you should consider your share of profits and losses in the LLC to be fully distributed.

Taxation once you leave the LLC will depend on how your LLC is taxed. If you have been taxed as a partnership, you will receive a final tax form that notates that it is your last. If the LLC is taxed as a corporation, the member changes don’t have to be reported on the business tax return itself.

Does This Voluntary Withdrawal of a Member Terminate the LLC?

A member voluntarily withdrawing, or disassociating from, an LLC will not terminate the LLC. In the absence of an agreement between members, it’s possible that the state statutes could impact this, but as a general rule, one member withdrawing does not mean the end of the LLC. The LLC will remain in business once the withdrawing member has been fully removed.

However, if the LLC is a single-member LLC, then removing yourself would result in the dissolution of the LLC as there would be no remaining member-owners to continue on with the business. Articles of dissolution would need to be filed and the proper process followed to dissolve the LLC at that point.

And if you're ready to do business by yourself and set up your own company, Bizee can help you create a new LLC for free. Learn more about our $0 + state fee LLC and how Bizee can help you every step of the way.