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A Member can Withdraw from an LLC, Despite the Operating Agreement

Photo of an exit sign, symbolizing the right of a member to withdraw from an LLCFrom time to time, I am asked how a member of a limited liability company (LLC) can stop being a member. In legal terms, this is referred to as a member wishing to withdraw from an LLC.

Section references below have been updated to reflect California’s new LLC law that took effect on January 1, 2014 (see RULLCA Brings New LLC Laws to California in 2014).

Under this new law, the term “withdraw from a limited liability company” was changed to “dissociate as a member” or “withdraw as a member”.

A well-written Operating Agreement will address this question directly. It will specify the circumstances under which members may withdraw from an LLC, and the consequences of withdrawal.

However, irrespective of what the Operating Agreement says, California law gives every member the right to withdraw from an LLC.

Corporations Code Section 17706.01(a) states:

A person has the power to dissociate as a member at any time, rightfully or wrongfully, by withdrawing as a member by express will pursuant to subdivision (a) of Section 17706.02.

Section 17706.02, in turn, states:

A person is dissociated as a member from a limited liability company when any of the following occur:

(a) The limited liability company has notice of the person’s express will to withdraw as a member….

Upon providing notice, the withdrawn member retains a right to any economic distributions from the LLC but is no longer a member. However, a member who wrongfully dissociates is liable to the LLC and to the other members for any damages caused by the dissociation.

Photo credit: stock.xchng

Dana H. Shultz, Attorney at Law  +1 510 547-0545  dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.

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  1. 1/20/2012 | 2:25 pm Permalink

    Great post. The specifics escape me, in particular form llc-12.
    Do I file llc-12 with an attachment that states I am withdrawing?
    What do I do about the irs? The llc I am part of is not in business for 5 years and
    my partners an not responsive. The company has no assets or liabilities incorporated in delaware
    Filed paperwork in california.

  2. 1/20/2012 | 4:31 pm Permalink

    @michael wall
    Thank you for the compliment, but I’m afraid this post won’t do a lot to help you, because your LLC was formed in Delaware (and I am not familiar with DE LLC law).

  3. 9/3/2013 | 7:07 am Permalink

    I have ceased being a member of this LLC 3 yrs ago, how do I have my name removed from the LLC?

    • 9/3/2013 | 7:17 am Permalink

      (1) The Operating Agreement should have been amended to remove you as a member and, if applicable, as a manager. (2) The LLC should have filed at least one biennial Statement of information, on which you do not appear, with the Secretary of State since then. (3) I have no way of knowing whether there are any other documents that referenced you in connection with the LLC.

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  6. Quora

    I bought shares of an LLC I was working for and want out. What are my options?…

    No one can answer your Qs properly without (a) analyzing the operating agreement and (b) knowing which state’s laws govern that agreement. In my experience, it is unlikely that the OA gives you the right to force the LLC or its founder to buy you out….