How Do You Remove a Partner From an LLC? A Complete Step-by-Step Guide


How Do You Remove a Partner From an LLC? A Complete Step-by-Step Guide


Removing a partner (also called a “member”) from an LLC can be complicated, especially when the operating agreement is unclear or when the removal is involuntary. Whether the partner wants to leave or the remaining members want them out, there are specific legal steps that must be followed to protect the LLC and avoid disputes.

This guide explains how to remove a partner from an LLC, how buyouts work, the difference between voluntary and involuntary removal, and what documents must be updated during the process.

1. Review the Operating Agreement

The most important step—and the one that controls nearly every aspect of removal—is reviewing your Operating Agreement.

Look for sections like:

  • Member removal

  • Withdrawal or resignation

  • Buyout or redemption procedures

  • Voting requirements

  • Valuation of ownership interest

  • Removal for cause

A well-drafted operating agreement will tell you:

  • If you can remove a member

  • How to remove them

  • What vote is required

  • How to value and buy out their share

  • What happens after removal

If your operating agreement includes removal rules, you must follow those procedures exactly.

2. If There Is No Operating Agreement

If your LLC does not have an operating agreement—or it does not address removal—the default rules in your state’s LLC statute apply.

Most state laws:

  • Do not allow removing a partner without their consent

  • Require a court order for involuntary expulsion

  • Allow voluntary withdrawal but with strict rules

  • May require dissolving the LLC if members can’t agree

Without written removal provisions, removing a partner becomes much harder.

3. Determine Whether the Removal Is Voluntary or Involuntary

Voluntary Removal

The partner chooses to leave due to:

  • Retirement

  • Personal reasons

  • Conflict avoidance

  • Wanting to cash out

  • Wanting to start a new business

Voluntary exits are typically simpler and involve:

Involuntary Removal

The LLC wants to remove the member due to:

  • Misconduct

  • Breach of fiduciary duty

  • Violating the operating agreement

  • Failure to contribute

  • Disruptive behavior

  • Financial mismanagement

Most states do not allow involuntary removal unless the operating agreement permits it or unless a judge orders the expulsion.

4. Hold a Vote (If Allowed by the Agreement)

If the operating agreement allows removing a partner, it will specify:

  • Majority vote

  • Supermajority vote

  • Unanimous vote

  • Whether the departing member can vote on their own removal

Document the vote through:

  • Meeting minutes

  • Written resolution

  • Signed member consent

This becomes part of your permanent company records.

5. Create a Buyout or Withdrawal Agreement

Once removal is approved, the LLC must deal with the member’s ownership interest.
This typically requires a buyout agreement.

The buyout agreement should specify:

How the membership interest is valued

Options include:

  • Fair market value

  • A formula in the operating agreement

  • Book value

  • Appraisal by a third party

  • Capital account balance

How the LLC will pay the departing member

Common arrangements:

  • Lump-sum payment

  • Installment payments

  • Redemption of interest by the LLC

  • Purchase by remaining members

Effective date of removal

This determines profit distribution and tax responsibilities.

Mutual release of liabilities

Protects both the LLC and the former member from future claims.

A signed buyout or withdrawal agreement is legally essential.

6. Update Internal LLC Documents

After removing a partner, make sure to update:

  • Member ledger

  • Ownership percentages

  • Profit/loss allocations

  • Voting rights

  • Capital accounts

  • Operating procedures

Although these are internal documents, they must be accurate for legal and tax purposes.

7. Amend the Operating Agreement

Update the operating agreement to reflect:

  • New membership structure

  • Revised voting rules

  • Updated management roles

  • New distribution percentages

This becomes the new governing document moving forward.

8. File Amendments With the State (If Required)

Most states do not require you to file member information with the Secretary of State.
However, you must file an amendment if:

  • Member or manager names were listed in the Articles of Organization

  • You are changing the registered agent, management structure, or company name

Some states also require updating annual reports.

9. Update Tax Information and Third Parties

After removing a partner, notify:

IRS

  • Update “responsible party” using Form 8822-B if needed

  • Issue final K-1s for multi-member LLCs

State tax agencies

Update withholding, payroll, or sales tax accounts if applicable.

Banks and financial institutions

Banks may require:

  • Updated operating agreement

  • Resolution removing the member

  • New signature cards

Vendors, landlords, and contracts

Update authorized signers and legal notifications.

Can You Remove a Partner Without Their Consent?

Yes — but only if:

✔ The operating agreement explicitly allows involuntary removal, or
✔ A court orders the member’s removal.

No — if:

❌ The operating agreement is silent
❌ The LLC is relying solely on a majority vote without legal authority
❌ The removal is based on personal disagreements without contractual justification

Involuntary removal often leads to litigation if not handled properly.

Reasons an LLC Might Need to Remove a Partner

Common justifications include:

  • Violating fiduciary duties

  • Engaging in fraud or illegal activity

  • Misusing company funds

  • Failing to perform obligations

  • Constant business disruption

  • Bringing financial or legal risk to the LLC

  • Causing deadlock or paralysis in decision-making

These reasons must be supported by evidence if challenged.

Do All Partners Need to Be Bought Out?

Typically, yes.
A member leaving—voluntarily or involuntarily—must be compensated according to:

  • The operating agreement

  • State law

  • The buyout agreement

You cannot simply remove a person and take their equity unless they contractually agreed to that.

Final Answer: How Do You Remove a Partner From an LLC?

Here’s the step-by-step summary:

  1. Review the operating agreement

  2. Determine whether removal is voluntary or involuntary

  3. Check state law if no agreement exists

  4. Hold a vote if removal is allowed

  5. Draft a buyout or withdrawal agreement

  6. Update internal ownership and company records

  7. Amend the operating agreement

  8. File state amendments if required

  9. Update IRS, banks, and third-party accounts

Removing a partner is much easier with a strong operating agreement and significantly harder without one.

Get Free Consultation with FormLLC


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