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LLC Question 107

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Question: I have an LLC with myself and one other person listed as members. The other member has been arrested and sentenced to a long term jail sentence. How do I terminate his membership.

Response: To my knowledge, there are two ways to involuntarily force out a member from an LLC in Delaware: (a) if the member declares bankruptcy, his or her LLC interest is terminated under Delaware Code § 18-304 or (b) if the LLC operating agreement contains a mechanism for terminating a member upon certain listed conditions (and incarceration or unavailability for work is one of the listed conditions). I am unaware any other provision in the Delaware LLC Act providing for termination of a member's LLC interest. Hopefully, your LLC operating agreement is of some assistance to you in this situation. If not, the next best solution would be for you to work out an arrangement to buy out the other member going to jail. Failing the first two option, involuntarily dissolving the LLC is probably the route to go but that requires a court order and is a cumbersome plus expensive. Please seek advice on this matter from an experienced corporate attorney in Delaware.

Submitted: 5-6-2007; Lance, DE
Response: 5-8-2007; JJR

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