How to Withdraw From an LLC

By Stephanie Kurose, J.D.

How to Withdraw From an LLC

By Stephanie Kurose, J.D.

A limited liability company (LLC) is a common type of business structure. It provides its owners, called members, with personal liability protection similar to a corporation while also giving them the desired flexibility to manage the business, a characteristic commonly attributed to partnerships. Every LLC must have at least one member. Oftentimes, there are multiple members, with no limits to the maximum number the business can have.

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Withdrawing from an LLC

There are a number of reasons a member may decide to withdraw from an LLC. Regardless of the reason, the parting member and the remaining members must follow certain formal procedures in the event a member wants to leave the business.

1. Check the LLC's organizing documents.

In order to form an LLC, members must file articles of organization with the state that contain basic information about the business. In addition, the majority of these types of companies also create an operating agreement, which is a legal document governing how the business is run. One or both of these two documents usually contain the procedures for when a member wants to withdraw, which the business should follow. Most states require the withdrawing member to give the remaining members prior written notice.

2. Determine the parting member's share of the LLC.

Determining how much interest you are entitled to when you withdraw may require an audit of the business's books or an independent evaluation. In addition, if the interest paid to you would render the LLC unable to pay expenses, some states may not absolve you of financial responsibility.

3. Prepare a written notice.

If required, prepare your written notification to the remaining members of the LLC that states your intent to withdraw your ownership interest in the business and that you request full payment for the value of that interest. Cite to the specific provision in the operating agreement or articles that governs member withdrawals. Once drafted, deliver the notice to all members and obtain proof from each that they received it.

4. Request a vote.

Significant events typically require a formal vote by the remaining members to approve the withdraw. If this is required in your state or by your business's articles or operating agreement, request a vote of the membership to approve your withdrawal.

5. File the notice of withdrawal with the state.

If required, file your notice of withdrawal with the state business authority, often the Secretary of State. Some states do not require you to file the notice if the business remains operational after you withdraw.

Other Considerations

If the LLC's articles of organization or operating agreement do not speak to how a member can withdraw, then the rules usually default to the business's state's law. But if the remaining members vote to disapprove the withdrawal, then it is a good idea to schedule a meeting with the remaining members to try to reach a compromise. You may be able to sell your interest in the business to a remaining member.

Withdrawing from an LLC can be a major decision that might not even absolve you from financial responsibility. It's important to have a section in the business's operating agreement that outlines what can be done when a member wants to withdraw, that way things are done on the company's terms and not whatever state law would be.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.

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