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Ask a Lawyer -- LLCs
LLC Question 119
Question: I owned a NJ LLC with two other members. We don't have an operating agreement. One of the members and I wish to remove the 3rd member, because he does not contribute anything to the LLC. I called the NJ Dept. of Treasury to ask how to remove the member. They stated that all we need to do is to file a Certificate of Amendment (Form L-102). My question is can we remove the member from the LLC by just filing that form, which only requires one member signature? if so, what happened to the removed member interest in the LLC?
Response: "My question is can we remove the member from the LLC by just filing that form, which only requires one member signature?" The key to the question is a fact left unsaid, i.e., is the removal of the 3rd member voluntary or involuntary? I assume it is involuntary. You cannot involuntarily remove a member through vote of the other members absent other circumstances. These circumstances for involuntary removal of a member can be set out in an operating agreement pursuant to NJ Code Section 42:2B-24(b)(1) ... but you don't have one. By statute in New Jersey, I see the following other grounds for involuntary removal of a member:
(2) the member's expulsion by the unanimous vote of the other members if:
1. it is unlawful to carry on the limited liability company with that member;
2. there has been a transfer of all of that member's transferable interest in the limited liability company, other than a transfer for security purposes, or a court order charging the member's interest;
3. within 90 days after the limited liability company notifies a corporate member that it will be expelled because it has filed a certificate of dissolution or the equivalent, its charter has been revoked, or its right to conduct business has been suspended by the jurisdiction of its incorporation, there is no revocation of the certificate of dissolution or no reinstatement of its charter or its right to conduct business; or
4. a limited liability company or a partnership that is a member has been dissolved and its business is being wound up;
* * *
(4) in the case of a member who is an individual:
1. the member's death;
2. the appointment of a guardian or general conservator for the member; or
3. a judicial determination that the member has become incapable of performing the member's duties under the operating agreement;
See NJ Code Section 42:2B-24(b)(2) and (b). Sorry, but as you can see from the above, my reading of the New Jersey LLC Act is that it is only under a very limited set of circumstances can an LLC member can be removed involuntarily (apart from procedures for removal set out in an LLC operating agreement).
Submitted: 8-1-2007; Tony, NJ
Response: 8-3-2007; JJR
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