Removing a member from an LLC in California (CA) is straightforward. It typically requires a vote by the existing members to decide whether to remove the member in question. If the vote favors removal, the individual being removed must fulfill their obligations accordingly.
After extensive research and analyzing the state's statutes, our legal experts have outlined comprehensive guidance on removing a member from an LLC in California.
This article explores the steps in terminating a member's interest in an LLC, ensuring compliance with California state regulations. We’ll also discuss the legal implications to ensure a smooth and compliant process.
Quick Summary
- Removing a member from an LLC in California involves a vote by existing members, followed by fulfilling obligations by the member being removed.
- The process requires an amended operating agreement reflecting the member's departure and may involve filing dissolution papers with the Secretary of State.
- Voluntary withdrawal requires a written notice of withdrawal, while other reasons for removal include death, bankruptcy, or court order. Compliance with the LLC's operating agreement or articles of organization is essential.
What Legal Documents Do You Need?
The legal document you need to remove a member from an LLC in California is an amended operating agreement reflecting the member's departure.
Depending on how the business was organized, the removal process can vary significantly and involve filing dissolution papers with the Secretary of State.
The first thing to do is ensure you have all the required information and legal documentation.
You will need the following:
- The Articles of Organization
- Operating Agreement
- The number of members in your LLC and their names
- The percentage of LLC ownership each LLC member has?
Voluntary Withdrawal
A member of an LLC can only be removed via written notice of withdrawal. The removal can happen unless the LLC's articles of organization or LLC operating agreement specify a method for LLC members to vote out other members.
The number of votes required should be specified in the operating agreement (unanimous consent or partial 50/50).
California law supplies default rules for the default procedure that applies to voluntary withdrawal from a California LLC [1].
If multiple members are in your CA LLC, the remaining members must sign the notice of withdrawal.
The notice of withdrawal must specify the effective date of the withdrawal and identify any known debts or other obligations owed by your LLC.
If you voluntarily withdraw from an LLC without following these rules, then California law may treat this as wrongful dissociation under California's right of control statute.
If only one member is in your California LLC, that person can withdraw from an LLC for any reason by giving written notice to the California Secretary of State.
Withdrawing members must generally still comply with the terms of the LLC's operating agreement or articles of organization.
Statement of Information (Form LLC-12) is the document the withdrawing member must fill out and pay the filing fee.
The Secretary of State does not provide any assistance in completing this document.
Other Reasons for Withdrawal
A member's death could be why their name has to be removed from the LLC formation documents. In these instances, there should be a provision explaining what needs to happen with the deceased member's share in the LLC.
The departed member's share must be purchased by surviving LLC's members only if a provision allows them to do so in the articles of organization or operating agreement.
Otherwise, they will automatically become owners of that deceased's membership interest, and their names must appear on all documents.
The bankruptcy of a member can also trigger their removal, as it may affect their ability to fulfill their obligations to the LLC.
A court order may also be issued if a member engages in fraudulent activities, breaches their fiduciary duties, or violates the LLC's operating agreement.
What to Do after Removing a Member?
The state's laws require that the other limited liability company members report ownership changes and provide other information for the new LLC ownership to the California Secretary of State.
The remaining members must file an amended Articles of Organization with the state as soon as possible and pay a $30 filing fee.
Two forms are available, depending on how you wish to proceed after removing a member from a California LLC. If you want your former Articles to remain public, file the Amendment to the Articles of Organization (Form LLC-2).
If you wish to replace the old Articles entirely, file Restated Articles of Organization (LLC-10).
If the limited liability companies' dissolution occurred due to a court ruling or legal action, you must file a Certificate of Cancellation (Form LLC-12) with the state [2].
Consider getting a law firm since the state LLC laws vary, even when the operating agreements may look the same.
FAQs
How Do I Remove a Manager from My LLC in California?
You can remove a manager from your LLC in California by following these steps:Â
- Review your LLC operating agreement
- Hold a member vote
- Document the removal in writing
- Update the California Secretary of State records
The operating agreement has supremacy when dealing with manager removal. Therefore, consult a legal professional for proper guidance in this process.
How Do I Remove an Agent for Service of Process in California?
You can remove an agent for service of process in California by submitting a completed Agent for Service of Process Change form to the Secretary of State's office. Ensure accurate information is provided and follow the specified guidelines to remove the agent successfully.
Can LLC Members Sue Each Other in California?
Yes, LLC members can sue each other in California under certain circumstances.
Disputes among members can be addressed through legal action, but the specific rights and remedies available may vary based on the LLC's operating agreement and applicable California laws.
When a Member Dissociates, What Does That Mean?
When a member dissociates, it means they formally withdraw or disassociate themselves from a group or organization. This decision often entails the termination of their rights, responsibilities, and affiliations with the said entity.
Can a Member Force a Buyout?
A member can force a buyout under the California Limited Liability Company Law. The law allows for forced buyouts under certain circumstances. If members change ownership percentages in an LLC or dissolve, a buyout may be required.
This process is called redemption and can be initiated by either the LLC or the departing member.
How to Properly Remove a Member From an LLC in California?
If you have to remove a member of your business in the future, review the LLC operating agreement for any provisions regarding member removal. If no specific provisions exist, follow the default rules outlined in California Revised Uniform Limited Liability Company Act.
You’ll then notify the member of the intended removal and hold a vote among the remaining members.
Make sure to have an LLC operating agreement before starting your business. You can also have a buy-sell agreement specifying what happens if one or more members have to leave the company at some point.
Seek professional legal help before making any changes to your operating agreement.
References
- https://tagrelaw.com/how-to-voluntarily-withdraw-from-an-llc/
- https://www.sec.gov/Archives/edgar/data/1941829/000194182922000004/statement_of_information.pdf
