Q: I need to remove a member from my LLC. Is this possible? Or would dissolving the LLC be the best course of action?
Thank you to a client from Georgia for that great question! Yes, you can remove a member from your Georgia LLC, but you’ll have to jump through a few hoops before it becomes official. In most cases, removing a member from your current LLC is easier than dissolving the LLC and starting fresh. To find out which option is right for you, it’s a good idea to talk to a CPA. Here’s how you can remove a member from your Georgia LLC.
Option 1. Remove a Member from Your LLC
Will the LLC member voluntarily withdraw from the LLC? If this is the case, and your LLC member simply wants out, the path ahead is pretty straight forward.
Reference the Operating Agreement
Your first step is to reference your LLC’s operating agreement. If your Georgia LLC operating agreement spells out exactly how to remove a member from the LLC, removal should be pretty simple.While Georgia law doesn’t require an LLC to have an operating agreement, in cases like this,a well thought out operating agreement isdefinitely beneficial.
Without an operating agreement, your LLC will be subject to Georgia law. Pursuant to GA Code § 14-11-601.1, unless otherwise stated in the operating agreement or articles of organization, an LLC member can be removed upon the occurrence of any of the following events:
- The LLC follows the policy in its operating agreement or articles of organization.
- The member’s interest in the LLC is purchased or the member is fully compensated by the LLC.
- A court order rules the member incompetent to manage their affairs.
- A majority of the LLC members vote to remove the member.
In most cases, removing an LLC member is done so by a mutual agreement and won’t require involving lawyers or courts.
Will you need to amend the LLC’s Georgia Articles of Organization?
It depends. Georgia doesn’t require you to list members’ names or addresses on the Georgia Articles of Organization, but if you included the name of the member you’re removing when you filed your articles, you’ll need to file Articles of Amendment to Articles of Organization. Online filings cost $20. Mailed filings are $30.
Read our page on How to File Georgia LLC Amendment.
Where do I submit Georgia LLC Articles of Amendment?
Amendments to articles are filed with the Georgia Secretary of State, Corporations Division.
In-Person/Mailed Filings:
2 Martin Luther King Jr. Dr. SE
Suite 313 West Tower
Atlanta, Georgia 30334
Phone: (404) 656-2817
Online:
Georgia Corporations Division Online Services
Option 2. Dissolve the LLC
Your LLC’s operating agreement may explain the grounds for and procedure for removing a member. The usual method of involuntary removal is a vote by the other members followed by some sort of buyout based on the share of LLC ownership the departing member has. Member buyouts may be also be addressed in your LLC’s operating agreement. However, if the member refuses to leave, it may be easier to dissolve the LLC entirely. Georgia Code § 14-11-603 lays out the grounds for judicial dissolution. In essence, a Georgia court will oversee the dissolution of the LLC and award the members their share of the proceeds.
Next Step: Get In Touch With the IRS
You’ll need to contact the IRS if removing a member changes your LLC from a multi-member LLC to a single-member LLC. A multi-member LLC is classified by the IRS as a partnership. A single-member LLC is a disregarded entity. This means you’ll need to file an Entity Classification Election (Form 8832) with the IRS to change your LLC’s classification.
You’ll also need to contact the IRS if the member you’re removing was listed with the IRS as the LLC’s “responsible party.” The IRS defines the “responsible party” as “the true principal officer, general partner, grantor, owner or trustor” of your LLC. In plain English, the responsible party is the person who has the authority to oversee and control the finances and assets belonging to the LLC. File Change of Address or Responsible Party (Form 8822-B) form with the IRS to make the change.