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Ask a Lawyer -- LLCs
LLC Question 164
Question:
I am a member of a Georgia LLC without an operating agreement that has only two members. One member wants out, resign from the LLC, so what is needed to do that so that they have completely nothing to do with the business anymore? They do not want any equipment or funds they just want out. I want to keep the company and add another Member so what do I need to do (forms and etc...)? This is in reference to a Martial Arts School LLC.
Response: Georgia amended it's LLC code in 1999. If your LLC was formed prior to July 1, 1999, then § 14-11-601 controls withdrawal from a Georgia LLC. If after that date, § 14-11-601.1 applies. I have reproduced both Georgia statutes here. I'll assume your LLC was created after July 1, 1999 and is covered by 14-11-601.1. In this case, look at subsection (d) thereof. Except as otherwise provided in the articles of organization or a written operating agreement, a member may not withdraw from the limited liability company. Thus, you'll need to enter into an operating agreement with the other member which grants a member the right to withdraw and on what terms (i.e., what does the withdrawing member get upon exiting the LLC?). After that, the other member gives notice of withdraw. Upon payment of whatever is due to the withdrawing member in exchange for his or her membership interest in the LLC, usually the withdrawal is complete. You may wish to contact the Georgia Secretary of State's office to see if anything needs to be filed with that office.
One final thought. The members of most small businesses operating as LLCs have guaranteed some sort of business debt such as office space lease payments, trade credit with a major supplier, bank loan for operating cash, equipment lease payments, etc. Withdrawing from an LLC does not remove a member's guaranty with a third party. This must be dealt with separately and may be something that the withdrawing member is unable to get out from under. For instance, a landlord may be unwilling to release a withdrawing member from the guaranty of a lease unless and until a new LLC member (of equal credit worthiness) steps in to give his guaranty.
Submitted: 01/24/2008; Brenda, Georgia
Response: 01/24/2008; JJR
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