How to Remove a Member From an LLC in New York: A Step-by-Step Legal Guide

 

How to Remove a Member From an LLC in New York: A Step-by-Step Legal Guide

Removing a member from a New York LLC can be one of the most challenging internal business decisions. Whether the member wants to leave voluntarily or you need to expel them due to disputes, misconduct, or lack of participation, New York law has specific rules that must be followed.

This guide explains how to legally remove a member from an LLC in New York, including internal procedures, state requirements, buyout rules, documentation, and what to expect during the process.

Understanding Member Removal in a New York LLC

In New York, removing a member is controlled primarily by two things:

  1. Your Operating Agreement

  2. New York LLC Law (NY Limited Liability Company Law, Article 6)

New York is stricter than many states—an LLC cannot simply vote someone out unless the operating agreement allows it or a court intervenes.

Step 1: Review the Operating Agreement

Your operating agreement is the master rulebook.
Look for sections titled:

  • Member Withdrawal

  • Expulsion or Removal

  • Buyout of Membership Interest

  • Voting or Consent Requirements

  • Events Triggering Dissociation

Most well-written agreements specify:

  • When a member can be removed

  • How removal is voted on

  • How to value and buy out the departing member’s interest

If the operating agreement includes removal procedures, those rules control the process.

Step 2: If There Is No Operating Agreement (or It’s Silent)

New York’s default LLC laws apply.

Important:
Under New York law, members generally cannot be forced out unless:

  • The operating agreement allows expulsion, or

  • A court orders the member removed for wrongful conduct.

Without written rules, involuntary removal is extremely difficult.

Step 3: Hold a Vote or Obtain Written Consent

If your operating agreement permits removal, follow the voting rules exactly as written:

  • Majority vote

  • Supermajority vote

  • Unanimous consent

  • Written consent instead of a meeting

Document the decision through:

  • Meeting minutes

  • Written resolution

  • Updated membership ledger

This record protects the LLC in case of disputes.

Step 4: Determine the Buyout Terms

Removing a member also requires handling their ownership interest.

You must establish:

How much the member’s interest is worth

Common valuation methods include:

  • Fair market value appraisal

  • Formula stated in the operating agreement

  • Capital account balance

  • Independent valuation firm

How they will be paid

Options include:

  • Lump-sum payment

  • Installment payments

  • Redemption of units by the LLC

  • Sale of interest to remaining members

A Withdrawal or Buyout Agreement should be drafted and signed.

Step 5: Update Internal LLC Documents

After removal, update:

  • The operating agreement

  • The membership register

  • Profit/loss allocation percentages

  • Voting rights

  • Ownership tables

  • Capital accounts

Even though these documents are internal, they serve as legal evidence of the new structure.

Step 6: Amend the Operating Agreement

Once the member is removed, amend the operating agreement to reflect:

  • The changed membership list

  • New voting rules

  • Updated management structure

  • Revised profit distribution rules

New York does not require filing the operating agreement with the state, but keeping updated records is legally essential.

Step 7: File an Amendment Only If Public Information Changes

New York does not require filing anything with the Secretary of State unless:

  • The removed member was listed as a manager in public filings, and

  • The LLC wants to change the names of public-facing managers.

In that case, you would file a Certificate of Amendment.

Most LLCs do not name members publicly, so no state filing is needed.

Step 8: Notify Banks, Tax Authorities, and Third Parties

Banks and financial institutions often require:

  • Updated operating agreement

  • Resolution removing the member

  • New authorized signer forms

You may also need to update:

  • EIN responsible party (with IRS Form 8822-B)

  • New York State taxation accounts

  • Payroll and sales tax accounts (if the removed member was listed)

  • Contracts, leases, and vendor agreements

Failing to notify these parties can result in liability or access issues.

Voluntary vs. Involuntary Removal in New York

Voluntary Removal

A member may choose to leave due to:

  • Retirement

  • Financial exit

  • Personal reasons

  • Moving to a new business venture

This is generally straightforward and handled by a standard buyout agreement.

Involuntary Removal

Possible reasons:

  • Misconduct

  • Violation of the operating agreement

  • Breach of fiduciary duty

  • Fraud

  • Non-participation

  • Disrupting operations

But New York law does NOT allow you to remove a member involuntarily unless:

✔ The operating agreement permits it
OR
✔ A court orders the removal

Courts may expel a member only when:

  • Their actions are harmful to the LLC

  • They act dishonestly

  • They make it impractical to continue business

Involuntary removal often becomes a legal dispute, not a simple internal procedure.

Can You Remove a Member Without Their Consent?

✔ Yes, if your operating agreement specifically allows involuntary removal.
❌ No, if the agreement does not address removal.
❌ No, if the member is being removed solely by majority vote without proper authority.
✔ Possible through a court order, but only in severe cases.

Does New York Require a Form to Remove a Member?

No.
The state does not have a “member removal form."

All changes are handled internally unless you are changing publicly listed managers.

Final Thoughts: How to Remove a Member From a New York LLC

To legally remove a member from a New York LLC, you must:

  1. Review the operating agreement

  2. Follow the stated voting or removal procedures

  3. Conduct a formal vote and document it

  4. Execute a buyout or withdrawal agreement

  5. Update all internal LLC records

  6. Amend the operating agreement

  7. Notify banks, IRS, and state agencies

  8. File amendments only if public information changes

The process is easy with a good operating agreement and very difficult without one due to New York’s strict LLC laws.

Get Free Consultation with FormLLC


Comments

Post a Comment

Popular posts from this blog

LLC Operating Agreement: Everything You Need to Know (Complete Guide)

Image
  LLC Operating Agreement: Everything You Need to Know (Complete Guide) An LLC Operating Agreement is one of the most important documents your business will ever create. Whether you're launching a single-member LLC, building a multi-member partnership, or planning to grow your business over time, the operating agreement defines exactly how your LLC will operate—legally, financially, and structurally. While many states don’t require an operating agreement, every LLC needs one to protect the business and its owners. This guide explains everything you need to know, including what goes in an operating agreement, why it matters, and how to create one. What Is an LLC Operating Agreement? An LLC Operating Agreement is a legally binding internal document that outlines the ownership, rights, responsibilities, financial rules, and operational procedures of a Limited Liability Company. It covers: ✔ Ownership percentages ✔ Voting rights ✔ Profit and loss distribution ✔ Member rol...
Read more

What Should You Call Yourself as the Head of an LLC? (Complete Guide to Choosing the Right Title)

Image
  What Should You Call Yourself as the Head of an LLC? (Complete Guide to Choosing the Right Title) One of the most common questions new business owners ask is: “What should I call myself as the head of my LLC?” Unlike corporations—which use titles like CEO, President, or Director—LLCs offer far more flexibility. You can choose a title that fits your business structure, your brand, and how formal (or informal) you want your company to appear. This guide breaks down all the possible titles you can use as the head of an LLC, the legal meaning behind each one, and which title is best depending on how your LLC is managed. Do LLCs Need Formal Titles? Legally, no . An LLC does not require a specific title for its top decision-maker. However, using a title provides: ✔ Clarity for clients, vendors, and banks ✔ Authority when signing contracts ✔ Defined internal roles ✔ Professional credibility Your title should reflect your authority within the company—especially if your LLC h...
Read more

How to Start an LLC Requirements, Benefits, and Step-by-Step Process

Image
  How to Start an LLC Requirements, Benefits, and Step-by-Step Process Starting a business in the U.S. can be an exciting yet challenging journey, and one of the most popular structures for new businesses is a Limited Liability Company (LLC). An LLC combines the flexibility of a partnership with the legal protections of a corporation, making it ideal for entrepreneurs who want to protect personal assets while enjoying operational simplicity. Whether you are a U.S. resident or a global entrepreneur, understanding the requirements, steps, and benefits of starting an LLC is crucial. Services like  FormLLC  make this process seamless, especially for first-time business owners. What is an LLC and Why You Need One                                                                             ...
Read more