A limited liability company, or LLC, is a business structure that offers the liability protection of a corporation with the functional flexibility of a partnership. The partners in an LLC, referred to as "members," can be individuals, corporations or other LLCs. Along with the privileges and protections the LLCs affords its members, each member has individual rights, as outlined in the company's articles of organization and the operating agreement made by the members.
Right to Information
A member of an LLC has the right to view specific company records after filing a timely request. A member of an LLC should have access to current financial statements and any information about business transactions the LLC is involved in. The request must be made in a reasonable manner and must specify the information desired so the request does not disrupt normal business operations or violate the terms of the articles of organization or the operating agreement.
Right to Withdraw
Members of an LLC may withdraw from the partnership for any reason and at any time. A member's right to take part in overseeing the partnership ends when that member resigns. From that point, the member has no fiduciary duty to the LLC or its other members. Unless the original operating agreement contains a noncompete clause, the withdrawing member can open his own company and compete directly against the LLC he left.
Read More: How to Withdraw From an LLC
Right to Distributions
Members have the right to receive any distributions of the LLC's profits. The proportions of these distributions are spelled out in the operating agreement. However, an LLC may not distribute its profits in any way that forces the company into insolvency or that creates a negative balance between assets and liabilities. If a distribution occurs that makes the company insolvent, the managing member loses his liability protection and is personally responsible to the LLC and its other members.
Right of First Refusal
When a member withdraws from an LLC, most partnerships offer the remaining members the right to purchase the interest of the departing member. This "right of first refusal" allows the existing members the first opportunity to purchase the shares. Because an outsider who purchases interest in an established LLC can bring about changes that the remaining members may not agree with, the right of first refusal allows the current members to keep the former member's interest "in the family."
Living in Houston, Gerald Hanks has been a writer since 2008. He has contributed to several special-interest national publications. Before starting his writing career, Gerald was a web programmer and database developer for 12 years.