Depending on the state where your limited liability company is organized and the specifics of your LLC operating agreement, the procedures you will need to follow when a member resigns from your LLC will vary. Generally, your small business may be required to file paperwork with the secretary of state to reflect the change, and you will need to make a disbursement to the resigning member.
LLCs are registered with the secretary of state in the particular state where the company is based. When registering an LLC, you will have the option of registering with multiple members. Before addressing member resignation procedures, be sure to check your original LLC filing with your state to make sure that the resigning member is appropriately listed as an LLC member. Additionally, check your secretary of state's procedures for updating your registration after an LLC member departs. In Arizona, for example, you are required to file an amendment to your LLC registration by filing an articles of amendment document.
Although an operating agreement is optional in some states, most LLCs with multiple members enact such a document when forming the LLC. Your operating agreement should dictate the terms of what will occur when a member decides to resign from the LLC. Additionally, in some states, resignation from an LLC may not be possible without an operating agreement. Check the terms of your operating agreement to see how they may affect LLC member resignation.
In addition to your operating agreement and the paperwork your small business has filed with the state, state law may dictate how a member resignation must occur in your particular state. For example, in California, a member may resign from an LLC by giving written notice to the other LLC members regardless of what the operating agreement says. Under California law, the other LLC members may pursue the resigning member for breach of the operating agreement, but that member still maintains a right to resign at any time. In Arizona, LLC members are free to resign at anytime, but if you are the statutory agent for the LLC, you will be required to file an application for statutory agent resignation.
If the resigning member has made asset or capital contributions to the LLC, and the LLC currently holds assets of value, the resigning member will likely be owed a distribution upon resignation. A well-drafted operating agreement will carefully address all resignation procedures in accordance with state law, including how distributions will be made following resignation. If your operating agreement and state law are silent as to distributions, the resigning member will be owed at least the amount of her initial contribution.
- Tagre Law Office: How to Voluntarily Withdraw from a Limited Liability Company LLC
- Turn Around Management Association: Limited Liability Companies: Important Exit Considerations
- New York Business Lawyers: New York LLC Strategic Business Planning for Member Withdrawal
- High Touch Legal Services: A Member can Withdraw from an LLC, Despite the Operating Agreement
- At Your Business: Sample Form to End a LLC Partnership Agreement
- Alberty: Withdrawal of an LLC Member
- Northwest Registered Agent: How to withdraw your foreign Tennessee Limited Liability Company or Tennessee Corporation Certificate of Authority
- New Jersey Department of Treasury: Dissolve, Cancel, or Withdraw a Business
- Arizona Corporation Commission: Corporations Division Forms
Louis Kroeck started writing professionally under the direction of Andrew Samtoy from the "Cleveland Sandwich Board" in 2006. Kroeck is an attorney out of Pittsburgh, Pennsylvania specializing in civil litigation, intellectual property law and entertainment law. He has a B.S from the Pennsylvania State University in information science technology and a J.D. from Case Western Reserve University in Cleveland, Ohio.