While removing an owner (or “member”) from a multi-member limited liability company isn’t routine, it’s a normal step in the lifespan of a business. For instance, removing a member may be necessary in the wake of a death, a dispute, or when business partners decide to part ways.
What are the steps for removing an LLC member?
Most businesses outline procedures for separation—like removing a member or dissolving the business—in their Articles of Organization or Operating Agreement. What you can and can’t include in your articles and operating agreement can vary state-to-state, so you’ll want to make sure you know the procedure for your state.
You can find state-specific information by scrolling to the bottom of the Northwest LLC page and selecting your state.
What if my operating agreement and articles don’t outline how to remove a member from my LLC?
If your LLC’s formation documents don’t include procedures for removing a member from your LLC, you’ll have to follow your state’s statutes. Each state’s LLC statutes are based on the Uniform Limited Liability Company Act (ULLCA), which outlines procedures for important processes, like removing members, amending articles, and even dissolution. Your LLC will be subject to these “default statutes” if you haven’t included specific procedures in your articles or operating agreement.
What if the member doesn’t want to part ways?
While ULLCA does not contain provisions for involuntary removal of an LLC member, you can proceed in a few different ways:
1. Offer a buyout
This is when a company pay a member an amount equal to the member’s financial interest in the company in exchange for that member leaving the company.
2. Go to court
If the member in question refuses to accept a buyout, you can pursue the matter in court.
3. File a petition for dissolution
This is a drastic, uncommon solution. But technically, the members of an LLC can file a petition for judicial dissolution without the dissenting member. If successful, the LLC would then begin the process of Dissolution. (Again, this is a pretty dramatic way to solve a business dispute.)