When an LLC’s management has reached an impasse, guidance on removing a member of a limited liability company is sometimes necessary. However, LLC members aren't permitted to vote out other members of an LLC under the standard terms of the Uniform Limited Liability Company Act (also called ULLCA). ULLCA sets the operating agreements used to create the LLC acts for all 50 states as well as the District of Columbia when terms aren't detailed by the LLC's articles of organization or operating agreement.

Why Remove a Member from LLC?

While it isn’t a pleasant situation, removing LLC members might sometimes be needed when: 

  • There is a violation of the operating agreement.
  • The member has not paid their dues or contributions.
  • The member shows signs of inactivity or lack of participation.
  • Other members are dissatisfied with the member’s behavior.
  • There is a change in ownership or management structure.

There is a Violation of Operating Agreement

If the removed member is found to have violated the terms of the LLC's operating agreement, the other members may decide to remove them.

The Member Has Not Paid Their Dues or Contributions 

If the removed member has failed to make required payments or contributions, the other members may remove them to ensure the financial stability of the LLC.

The Member Shows Signs of Inactivity or Lack of Participation

If the removed member is inactive or uninvolved in the business operations, the other members may remove them to ensure efficient management of the LLC.

Other Members Are Dissatisfied with the Member’s Behavior

If the removed member's behavior is causing issues or conflicts within the LLC, the other members may decide to remove them to maintain the harmony and success of the business.

There Is a Change in Ownership or Management Structure

If the ownership or management structure of the LLC changes, a member may be removed as a result.

There are also cases where a member might want to know how to get out of an LLC, as they don’t want to be part of it anymore. While this might make the situation easier, both the departing member and the LLC still need to follow proper legal procedures. 

The Basics of Removing an LLC Member

In many cases, the articles of organization or the operating agreement for the LLC include specific procedures for removing a member from or getting out of an LLC. 

If your articles of organization include a procedure for removing a member from LLC, you should follow that procedure and submit a written notice of withdrawal. The steps to follow are:

  1. Determine the procedure for withdrawing members.
  2. Use the voting procedure if one is included in the terms of the LLC.
  3. Arrange for the member to submit a written resignation.
  4. Consider offering a buyout if the member doesn't willingly resign.
  5. Petition the court to dissolve the business if the member refuses to resign.

Involuntary Withdrawal of Limited Liability Company Members

An LLC's articles of organization should include terms for the involuntary withdrawal of members. The operating agreement is an enforceable, written contract that details the LLC's governing procedures. These documents were or should have been filed with the state when the LLC was established. 

Both the articles of organization and the operating agreement can include provisions for an LLC member's involuntary withdrawal. When withdrawing from an LLC, whether on a voluntary or involuntary basis, the member has the right to a buyout agreement and to receive payment from proceeds of the LLC in an amount that aligns with the member's ownership stake in the organization.

How to Remove an LLC Partner

When the articles of organization or the operating agreement of the LLC include a procedure for voting out a partner, follow the outlined guidelines. When the framework of the LLC allows for forcing LLC members to withdraw, follow the procedure as detailed. 

If there are no terms in place describing this procedure, the ULLCA doesn't allow voting members out of the LLC or forcing them to withdraw.

Members Can Willingly Withdraw

When an LLC member is willing to withdraw, written notice must be submitted to announce the resignation to the other members of the LLC. 

After the written withdrawal notice has been received, the withdrawing member is entitled to receive the appropriate share of assets and profits the LLC earned before the written withdrawal notice was submitted. 

If the departing member was the Responsible Party for the LLC, an IRS notification is necessary. This notification must be completed within 60 days of the change.

Buying Willingness to Withdraw

If an LLC member isn’t willing to be removed and there isn’t a procedure outlined in the operating agreement or articles of operation, the other members of the LLC may encourage the removed member with a buyout. 

The ULLCA's default provisions also allow members to assign their interest in an LLC to other people or business entities.

Sometimes, hesitancy to leave can be used as a negotiation tactic. 

Forcing an LLC Member Out

If parties don’t agree, the remaining LLC members can force out the hesitant party. However, this is only possible if the procedure is described in the articles of organization. Depending on the documentation, the removed member may be entitled to their initial investment and a part of the profit. 

If the LLC doesn’t have a member withdrawal procedure in its articles of organization, the LLC might have to file a lawsuit, as voting out a member isn’t possible without legal documents to attest to each member’s voting power. 

Dissolving the LLC if a Stalemate Arises

If managing the LLC has become untenable due to a member conflict, and the member isn't willing to withdraw, petitioning the court for a judicial dissolution of the LLC is an option. 

The ULLCA provides this as an option when the LLC is no longer able to operate as a business due to member conflicts. If the court grants a judicial dissolution, the LLC is ended. When an LLC has been dissolved by the court, no new contracts may be entered, and the organization must work toward the satisfaction of existing agreements.

What Happens After an LLC's Dissolution

The court system doesn't coerce people to stay in business with others when they no longer want to stay associated with them. When people are unwilling to stay in business together and petition to dissolve an LLC, the court issues an order that directs how the LLC will be dissolved. 

Once the LLC has been dissolved under the court's decision, the LLC's assets must be distributed among members, followed by the termination of the business. The remaining members of the LLC are permitted to begin a new LLC, though, and operate under the terms of the new business.

Need Help Removing A Member from an LLC?

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