How to Withdraw From an LLC

By Anna Assad

A limited liability company, or LLC, is a business that is not a corporation but still shields the owners from personal liability for the LLC's debts and legal obligations. The owners of an LLC are typically active in the business's management and daily operations, and the structure of an LLC is usually a mix of a corporation and a legal partnership. Withdrawing from an LLC you are a part of may be necessary if you cannot or do not want to participate in the company any longer.

A limited liability company, or LLC, is a business that is not a corporation but still shields the owners from personal liability for the LLC's debts and legal obligations. The owners of an LLC are typically active in the business's management and daily operations, and the structure of an LLC is usually a mix of a corporation and a legal partnership. Withdrawing from an LLC you are a part of may be necessary if you cannot or do not want to participate in the company any longer.

Step 1

Check the original articles of agreement and bylaws for the LLC. The procedure for withdrawing should be stipulated in the LLC documents. Laws vary by state, but you are typically required to give prior written notice to the other members of the LLC, such as six months before you withdraw.

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Step 2

Calculate how much you will be paid for your interest if the withdrawal procedure calls for such a purchase. Use the amounts and directions set forth in the LLC agreement to determine the amount you will receive. Review the amount carefully; the amount you are paid may be substantially less than your interest is worth. Do not withdraw if you cannot afford the loss.

Step 3

Review the financial state of the LLC. Some states do not absolve you of financially responsibility for the LLC if your interest payment upon withdrawal renders the company unable to pay expenses. Compare the LLC's cash-flow and financial situation to the amount you would be paid for your interest upon withdrawal.

Step 4

Draft your notice to withdraw in accordance with your state laws and LLC articles and bylaws. Deliver the notice to all members of the LLC. Obtain proof of receipt from each member for your records.

Step 5

Schedule a meeting with the other members of the LLC if the agreement prohibits your from withdrawing. Ask if you may sell your interest in the LLC. You may be able to sell your interest in the LLC entirely to another member or person, but the final approval may have to come from the other LLC members.

Step 6

Check the rules regarding filing a notice of withdrawal with your state's LLC, business or corporations department. You may not need to file the notice with your state if the LLC is still going to be operational after your withdrawal.

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How to Remove a Member From an LLC

References

Related articles

How to Transfer My Interest in an LLC

All owners, or members, of a limited liability company have a percentage of ownership of the business, referred to as interest. A member might want to transfer all his interest to another person if he wants to leave the business, or he can transfer some of his interest for financial purposes or personal reasons. The transfer of a member's interest is typically governed by the requirements set out in the operating agreement.

What Happens if You Breach an LLC Operating Agreement in California?

Unlike a corporation, which must have a board of directors, the members of an LLC are free to determine how an LLC will be structured and operated through executing an operating agreement. In California, an LLC member who breaches an LLC operating agreement is liable to the LLC for any economic consequences resulting from the breach.

What Forms Are Needed to Dissolve an LLC?

You must dissolve your limited liability company with your state if you are no longer doing business. The process will transfer your company's assets and settle your debts. Some states tax LLCs and have annual reporting requirements, and if you do not officially dissolve the company, fees and penalties may be assessed by the state even after your business has closed. The exact forms needed for LLC dissolution vary by state and the size of your LLC.

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