How do I Get Out of an LLC Partnership?

By Salvatore Jackson

A limited liability company, or LLC, is a form of business entity created by state LLC statutes. An LLC combines the flexibility and pass-through taxation of the traditional partnership with the limited liability protections of a corporation. An LLC's flexibility provides partners, called members, the ability to draft their own procedures for withdrawing from the LLC by executing an operating agreement. If an LLC does not have an operating agreement, state LLC statutes provide a default procedure for member withdrawal from an LLC.

A limited liability company, or LLC, is a form of business entity created by state LLC statutes. An LLC combines the flexibility and pass-through taxation of the traditional partnership with the limited liability protections of a corporation. An LLC's flexibility provides partners, called members, the ability to draft their own procedures for withdrawing from the LLC by executing an operating agreement. If an LLC does not have an operating agreement, state LLC statutes provide a default procedure for member withdrawal from an LLC.

Step 1

Determine if there is an LLC operating agreement provision pertaining to withdrawal. Under state LLC statutes, any provisions in an operating agreement supersede the default procedures of state LLC acts.

Ready to start your LLC? Start an LLC Online Now

Step 2

Follow the procedures of an operating agreement or the state LLC statute default provision if there is no operating agreement. Typically, operating agreements and state LLC statutes merely require a withdrawing member to submit written notice to the LLC. However, an operating agreement may limit the ability of a member to withdraw. If an LLC member withdraws in violation of the LLC operating agreement, that member is in “breach” of the operating agreement, and may be forced to pay damages resulting from the withdrawal from the LLC.

Step 3

Submit written notice of withdrawal to the LLC members. Write and sign a letter announcing that you are withdrawing from the LLC, and submit the letter to the LLC's members.

Step 4

Receive an appropriate share of LLC assets and income. If there is no provision in the operating agreement pertaining to member withdrawal, state LLC statutes typically grant a withdrawing member a share in the LLC's assets and income commensurate with the withdrawing member's ownership interest in the LLC. However, any damages owed by the withdrawing member from breaching the operating agreement are offset against the amount of assets and income paid to the withdrawing member.

Step 5

Submit notice of the membership withdrawal to a state agency, if required. Some states require an LLC to report its membership to either the state business licensing entity in the LLC's articles of organization or to the state tax agency in the LLC's annual report.

Ready to start your LLC? Start an LLC Online Now
What Happens if You Breach an LLC Operating Agreement in California?

References

Related articles

How do I Remove LLC Board Members?

A limited liability company, or LLC, is a form of business organization that provides the benefits of pass-through federal taxation, limited liability and relaxed filing requirements. Unlike a corporation, the owners, or members, of an LLC do not need to appoint a board of directors. However, larger LLCs frequently appoint managers -- who do not have an ownership stake in the LLC -- to a board of directors to manage day-to-day operations. While the procedure varies among states, removing a board member from an LLC requires a vote by LLC members.

New York LLC Regulations

A limited liability company, or LLC, in New York is regulated by the laws found throughout the Limited Liability Company Law section of the Laws of New York. An LLC is a hybrid of the legal aspects of a partnership and corporation. The members of an LLC are protected against personal liability for the business, but a formal corporation filing is not used.

What Laws Exisit to Protect a Member of an LLC From Bad Intentions of Other Members?

The conduct of limited liability company, or LLC, owners, known as members, is governed by state law. Each individual state has a limited liability company act, LLCA, or something similar, that establishes legal standards that apply to the conduct of members in relation to other members. If a member feels others are not acting in the best interest of all, there are legal avenues available to resolve the dispute or allow the dissenting member to exit the company.

LLCs, Corporations, Patents, Attorney Help

Related articles

How to Remove a Member From an LLC

It may sometimes become necessary to remove an owner of an LLC, particularly if the management of the LLC has ...

Can an LLC Operating Agreement Be Amended?

The operating agreement of a limited liability company sets the guidelines and regulations for the company's ...

Do All LLC's Have Operating Agreements?

An LLC, or limited liability company, is a business that combines the features of a corporation and a business ...

How to Undo an LLC

A limited liability company, or LLC, is a popular business structure among small business owners. An LLC is created ...

Browse by category