If you need to remove a member from your LLC the best place to start is by reviewing the LLC’s operating agreement, articles of organization and any other organizational documents. These documents should contain information about the proper procedures for removing member in a variety of contexts.
If the LLC is member-managed, then consent of the specified amount of membership interests or votes will be required to remove the member per the LLC operating agreement. If the LLC is manager-managed, the manager’s approval will be required. In New York, LLC manager removal requires a vote or written consent of a majority interest in the LLC and the same principal is generally applied to LLC member removal too.
Once the vote has been held, it should documented with a written resolution. Next, the operating agreement procedures should be followed for the removal, which may include rights of first refusal, buy out provisions, and/or other member withdraw provisions. Lastly, it’s prudent to have the departing member sign a separation agreement, LLC membership unit transfer agreement, or similar agreement winding up any outstanding matters for the member.
Note that an LLC operating agreement is a private contract that is not filed with the New York Department of State or any other governmental agencies. In NYS the names and addresses of members are also not required in the Articles of Organization (unless the LLC is a Professional Service PLLC), thus there’s usually not a need to update the LLC’s articles of organization, although the articles of organization should be reviewed as a precaution, especially if it was not drafted by an experienced Attorney.
If your LLC has a member that is withdrawing or being removed please contact us for a free phone consultation.