An LLC membership withdrawal agreement is a set of rules, normally included in a company's operating agreement, which provides details for how to handle a member leaving the company on a voluntary basis.
Limited liability company members who want to leave the company on a voluntary basis may find doing so to be a much more complicated process than just walking away from it. Leaving an LLC involves many steps, including:
It is important to keep in mind that any loans or financial debt accruals that have been personally guaranteed by a member are not protected in the same way other assets may be by the company.
Limited liability companies are formed and governed by specific statutes that have been put in place by local state authorities. The specifics of these rules will vary from one state to another but most make allowances for LLC members to draft a document called an Operating Agreement. Operating Agreements should include the required procedures that a member must follow if he or she wants to withdraw from the company voluntarily. It is worth noting that, in most states, the rules outlined in the Operating Agreement will take precedence over those of local state statutes.
If there are no provisions regarding a withdrawal from the company in the LLC's Operating Agreement, however, many states provide a default withdrawal process. In some cases, a company may have to dissolve and be re-formed in the event that a member chooses to leave. This isn't the norm, however, and typical default statutes allow the company to remain intact.
When a member chooses to leave a limited liability company, the technical term is "withdrawal." The way in which a withdrawal is handled for a specific limited liability company will differ from one business to another, so it's important to consult the Operating Agreement to reference the rules that have been outlined. If your company's Operating Agreement doesn't include any such rules, you have two options:
When it comes to leaving an LLC, regardless of the specific rules that are in place, there are three primary methods:
In a limited liability company, owners are referred to as "members." LLC members may eventually decide they wish to withdraw from the company for one reason or another. Most states have similar laws in place regarding limited liability companies, including specific rules when it comes to leaving a company. Most limited liability companies have a formal document known as an Operating Agreement, which should include detailed rules pertaining to withdrawing from the company. This document is a contract to which every member of the company has agreed and includes information about:
Typically, these procedures will include the following:
It is worth noting that this agreement should include details regarding when you plan to withdraw, how much you will be compensated, and how you'll receive said compensation.
Receive any compensation upon which you have agreed. At this point, the remaining members of the company will likely expect you to sign a release that confirms you have received the agreed upon compensation for your portion of ownership in the business.
If you need help with an LLC membership withdrawal agreement, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies such as Google, Menlo Ventures, and Airbnb.