How to Remove a Member From an LLC in California? (Guide)

Delina Chantel Yasmeh
Published by Delina Chantel Yasmeh | Author
Last updated: June 20, 2024
Methodology
We meticulously research and verify the information presented in our articles. By consulting reliable sources and ensuring factual accuracy, we are committed to providing readers with well-informed, trustworthy content.

Removing a member 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 analysis of the state's statutes, our legal experts have outlined comprehensive guidance on removing a member.

This article explores the steps involved in terminating a member's interest in an LLC and 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 involves a vote by other 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.
  • According to the California Small Business Administration, 99.8% of all companies in the state will be small businesses in 2023.
  • Compliance with the LLC's operating agreement or articles of organization is essential, in my opinion.


How to Remove an LLC Member in California?

To remove an LLC member in California, you need a legal document known as an amended operating agreement reflecting the member's departure.

From my legal experience, the first thing to do is ensure you have all the required information and legal documentation.

You will need the following:

According to the U.S Small Business Administration, small businesses employ approximately 7.2 million people or 48.5% of the private workforce.

"To be successful in business, you have to take risks and make hard decisions."

- Jon Morgan, CEO & Editor-in-Chief of Venture Smarter

Voluntary Withdrawal

A man wanting to voluntary withdraw

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 the operating agreement specify a method for LLC members to vote out other members.

For one of our LLCs, the number of votes required was specified in the operating agreement; it can be a unanimous consent or a partial 50/50.

California law supplies default rules for the procedure for voluntary withdrawal from a California LLC.

If multiple members are in your CA LLC, the remaining members must sign the notice of withdrawal.

In our case, the notice of withdrawal specified the effective date of the departure and identified any known debts or other obligations owed by our 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 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.

Other Reasons for Withdrawal

Death

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 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 the deceased's membership interest, and their names must appear on all documents.

Bankruptcy

Drawing from my legal experience, the bankruptcy of a member can also trigger their removal.

Bankruptcy may affect their ability to fulfill their obligations to the LLC.

Illegal Activities

A court order may also be issued if a member engages in fraudulent activities, breaches their fiduciary duties, or violates the operating agreement.

Related Articles:

What to Do after Removing a Member?

Man seriously working on documents he's working on

After removing a member, the state's laws require that the other limited liability company members report ownership changes and provide other information about the new LLC's ownership to the California Secretary of State.

For our LLC, the other members filed amended Articles of Organization with the state immediately and paid 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 [1].

FAQs

How Do I Remove a Manager from My LLC in California?

To remove a manager from your LLC in California, you need to review your LLC operating agreement, hold a member vote, document the removal in writing, and update the California Secretary of State records.

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.


References

  1. https://www.sec.gov/Archives/edgar/data/1941829/000194182922000004/statement_of_information.pdf

About The Author

Author
Delina Chantel Yasmeh, J.D./Tax LL.M, specializes in Mergers and Acquisitions at Deloitte and PwC, managing billion-dollar transactions. Educated in Accountancy at California State University and holding advanced degrees from Loyola Law School, she is highly skilled in tax law. Delina also dedicates time to pro bono work for women and children.
Learn more about our editorial policy
Growth & Transition Advisor
LJ Viveros has 40 years of experience in founding and scaling businesses, including a significant sale to Logitech. He has led Market Solutions LLC since 1999, focusing on strategic transitions for global brands. A graduate of Saint Mary’s College in Communications, LJ is also a distinguished Matsushita Executive alumnus.
Learn more about our editorial policy

You May Also Like

Leave a Reply

Your email address will not be published. Required fields are marked *