Legal Question in Business Law in Washington

Remove Member of LLC

There are three of us involved in the original filing of our LLC in the state of WA this January. One of the members wants to back out of the whole thing, however there is only her ownership interest ( no capital investment to worry about ) we're concerned with. We have not done any business yet, we're starting 3/1/06. Also the Initial Annual Report has not been sent yet. What needs to be done in order to just remove her name and interest to be split up between the other two remaining members?

Asked on 2/14/06, 2:49 am

1 Answer from Attorneys

Lee Brettin Brettin Law Office

Re: Remove Member of LLC

The Washington Limited Liability Company Act is codified under the Revised Code of Washington at RCW 25.15. The manner by which a limited liability company is formed is set forth at RCW 25.15.070. From your question it appears that each of the three members of the new company executed the certificate of formation. Further it appears that the certificate was property filed, either by hand delivery, mail or on-line, with the Washington Secretary of State. Unless a delayed effective date was specified, then the company was formed when the certificate was filed with the Secretary of State.

The act of withdrawing from membership in a Washington limited liability company is referred to as an event of disassociation. RCW 25.15.130(3) provides in relevant part that a member may withdraw from a limited liability company at any time and in accordance with the limited liability company agreement.

What is unclear from your question is whether or not the members also entered into a limited liability company agreement. It is common for members of a new LLC to form the company with the Secretary of State prior to finalizing the terms of and entering into a formal limited liability company agreement. If a limited liability company agreement has been signed, then the specific terms with respect to a member withdrawing from the company must be followed. At minimum this requires the members drafting and signing a disassociation agreement. The disassociation agreement should also provide for the manner in which the withdrawing memberís interest in the company is allocated among the surviving members.

If a limited liability company agreement has not been signed then the withdrawing member need only give notice, preferably in writing, to the surviving members to accomplish the act of disassociation. In this case, absent an agreement to the contrary, the surviving members will own the company on a 50-50 basis.

You should receive your first annual report along with your Certificate of Formation from the Secretary of State. When you fill out the form only list the names and addresses of the surviving members of the company.

Lastly, depending on the anticipated role of the withdrawing member in the planned business of the company, it may make sense to notify prospective business partners and members of the business community that the company plans to do business with that the withdrawing member has exited the company.

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Answered on 2/27/06, 1:00 pm

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