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.

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.

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.

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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.

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