Key Takeaways

  • LLC members enjoy financial, voting, and inspection rights that may vary by state or operating agreement.
  • Members are generally protected from personal liability for business debts but remain liable for their own wrongful actions.
  • Members have the right to withdraw (dissociate), inspect records, and receive distributions—subject to legal and contractual restrictions.
  • Charging orders protect LLCs from creditors seizing assets due to a member’s personal debts.
  • Rights differ in single-member vs. multi-member LLCs, particularly regarding asset protection and inspection access.
  • Fiduciary duties, dissolution rights, and the ability to seek legal remedy are part of core LLC rights.

LLC rights are outlined in the company's operating agreement created by the members and listed in the company's articles of organization. The members in an LLC can be other LLCs, corporations, and individuals. Along with the protections and privileges the LLCs provides its members, each member has individual rights.

Financial Rights of an LLC Member

It is important for members to understand the rights and responsibilities associated with being a part of a limited liability company (LLC). Members of an LLC carry certain financial rights which are typically outlined in the company's operating agreement. For example, members have the right to share in the distribution of the entity's profits and losses. They also have the right to a share in the allocation of the company's financial assets during its existence, liquidation, and dissolution.

The operating agreement will specify whether the financial assets will be shared equally or based on members' capital contributions. Fortunately, state laws do have default provisions in the event that an operating agreement hasn't been created by the members of an LLC.

Voting Rights of LLC Members

All members of an LLC have the right to vote. However, the extent of their voting rights is determined by whether the company is managed by the managers or members. When members manage an LLC, they may vote on all issues relating to the business. When the managers run the company, members have very limited voting power. Nonetheless, members are still permitted to vote on the following:

  • Making amendments to the operating agreement.
  • Electing or removing managers.
  • Admitting new members to the LLC.
  • Calling for a merger or a dissolution.

Member Inspections in an LLC

There are states that require an LLC to keep specific records. All members have the right to access and inspect these at any time. The records may include the following information:

  • Member names.
  • Member contributions.
  • Member addresses.
  • Shares of profits or losses of each member.
  • Names, addresses, and certain tax returns of managers.

It is important to note that an LLC's operating agreement may broaden or restrict members' rights to inspect company books and records.

LLC Members Liabilities

A member or manager may be held liable for violating any financial obligations to the LLC or its members. Additionally, members may be held liable for breaking any provisions in the operating agreement, such as withdrawing funds without following the protocol outlines in the agreement.

Fiduciary Duties of LLC Members and Managers

Members and managers may owe fiduciary duties depending on the management structure and state laws. Common duties include:

  • Duty of Loyalty: Avoiding conflicts of interest and self-dealing.
  • Duty of Care: Acting with diligence, care, and competence.
  • Duty of Good Faith and Fair Dealing: Upholding fairness in all LLC dealings.

Operating agreements may modify or waive certain duties, but not in a way that permits willful misconduct or unlawful behavior. Breaching these duties can result in legal liability or expulsion from the LLC.

Asset Protection and Charging Orders

LLC members benefit from asset protection mechanisms, such as charging orders. This legal remedy allows a creditor to claim a member’s distributions without seizing LLC assets or gaining control.

Key points:

  • Charging orders are the exclusive remedy in many states for creditors of LLC members.
  • In some states, creditors may foreclose on a member’s interest or even seek dissolution—especially in single-member LLCs.
  • Multi-member LLCs enjoy stronger protections because courts avoid disrupting other members’ rights.

These protections emphasize why LLCs are favored for safeguarding personal assets from business risks.

Personal Liability Exceptions for LLC Members

While LLC members are typically shielded from business liabilities, this protection is not absolute. Members can be personally liable under the following circumstances:

  • Personally guaranteeing business loans or obligations.
  • Committing fraud, illegal acts, or willful misconduct.
  • Failing to pay employment taxes or comply with fiduciary duties.
  • Treating the LLC as an extension of personal affairs (“piercing the corporate veil”).

For instance, if a member knowingly allows an underqualified employee to perform a dangerous task that results in harm, both the LLC and the member could be held liable. This underscores the importance of maintaining corporate formalities and ethical standards.

A Member's Right to Distributions

Every LLC member has the right to collect distributions of company profits. It's not a state requirement to distribute earnings, and the decision is usually left for the members. However, under no circumstance may an LLC decide to make a profit distribution that would cause the company to go bankrupt or generate an excess of liabilities over assets.

A Member's Right to Information

All members have the right to obtain any information relating to the LLC. By simply providing appropriate notice, a member can copy and inspect any LLC records that may relate to their business transactions, financial position, or any other relevant matter. Along with this right comes the responsibility of the member who is in charge of providing this information and making it accessible to all other members. It is important to note that this right does not allow a member to make any unreasonable requests that would cause any major disruption to the business.

Inspection Rights Under State Law

While operating agreements often define access to records, many states guarantee basic inspection rights. These rights typically include:

  • Access to essential company documents during regular business hours.
  • Review of the LLC’s tax returns, financial records, and membership lists.
  • A right to copy requested records, often at the member’s expense.

Members must act in good faith and with a proper purpose. For example, in California, the Limited Liability Company Act allows members to inspect records reasonably related to their interests, and courts have upheld enforcement against LLCs that wrongfully deny access.

A Member's Right to Dissociate

A member of an LLC has the right to dissociate from the entity at any time for any reason. However, personal liability to other members or the LLC may incur if the separation violates a timing requirement or responsibility outlined in the operating agreement. An individual's right to manage the business ceases at the time of the member's dissociation. Additionally, the person no longer has any fiduciary duty or owes contributions to the LLC.

Rights Upon Member Withdrawal or Dissociation

Upon dissociation, a member is entitled to:

  • A buyout of their interest at fair market value unless otherwise specified in the operating agreement.
  • A release from management duties and fiduciary obligations.
  • Any distributions owed before dissociation.

However, wrongful dissociation—such as withdrawing in breach of the operating agreement—may result in financial penalties or forfeiture of certain rights. Courts may also impose liability if dissociation harms the LLC’s operations or breaches duties to other members.

What Kind of Information Is an LLC Required to Keep?

As outlined in section 17058 of the California Corporations Code, LLCs are required to retain the following information:

  • Member names with the last known residential or business address.
  • Member equity contribution.
  • Each member's allocation in the net income.
  • Manager names with the last known residential or business address.
  • A copy of the following documents:
    • Articles of organization.
    • Local, state, and federal income tax returns for the prior six years.
    • Operating agreement and amendments.
    • Power of attorney.
    • Financial statements for the prior 6 years.
  • Records and accounting documents related to the internal affairs of the business for at least the last four years.

Legal Remedies for Violation of Member Rights

When an LLC infringes on a member’s statutory or contractual rights, members may seek legal remedies, including:

  • Filing a civil action to enforce inspection or distribution rights.
  • Seeking court-ordered dissolution if the LLC operates oppressively or unlawfully.
  • Requesting monetary damages or equitable relief for breach of fiduciary duty or operating agreement.

Courts often consider whether the LLC’s conduct was arbitrary, fraudulent, or contrary to governing documents. Members pursuing legal action should maintain clear records of their requests and communications with the LLC.

Frequently Asked Questions

1. Can an LLC member be held personally liable for business debts? Generally, no. However, personal guarantees, misconduct, or failure to maintain LLC formalities can result in liability.

2. Do single-member LLCs offer the same rights and protections? They offer similar rights, but asset protection may be weaker. Courts in some states allow creditors broader access to LLC assets in single-member LLCs.

3. What records can a member legally inspect? Members can inspect financial statements, tax returns, membership rosters, and operating agreements—subject to state law and the operating agreement.

4. Can a member force an LLC to distribute profits? Not usually. Distributions depend on agreement terms and must not render the LLC insolvent. Courts may intervene in cases of bad faith.

5. What happens if an LLC violates a member’s rights? The member can pursue legal remedies including damages, dissolution, or injunctive relief depending on the nature of the violation.

If you need help with LLC rights, you can post your legal need to UpCounsel's marketplace. Upcounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.