As LLCs grow and change, it sometimes makes sense for one of the LLC’s members to leave. The member can leave for business reasons, personal reasons, or a combination thereof. So how do you remove a member from your Washington LLC? Not surprisingly, it’s much simpler to do this if the member wants to leave. That’s also the more common scenario, so we’ll focus more on that in our guide below.
Check the Operating Agreement
A Washington operating agreement is an internal guide to how your company should function. It’s critical for a lot of reasons, including laying out the process of what must happen for a member to get removed. You aren’t required to file your operating agreement with the state, but you should still have it on hand to reference for situations like this.
An operating agreement should outline what to do in the case of both voluntary and involuntary member removals. It can also detail what kind of offenses warrant the involuntary removal of a member (like, for instance, if a member is actively working to undermine the LLC, or less dramatically, if a member files for bankruptcy).
WA Rev Code §25.15.006 (2022) allows for “verbal or implied” operating agreements, but memories are less reliable than an agreement written down on paper. Even if a member is leaving on good terms, you still want to do everything by the book. And that’s a lot harder to pull off when no one thought to commit the book to paper in the first place. If your LLC doesn’t have an operating agreement, you’ll have to follow Washington’s default laws for removing members. We explain more below.
Washington Laws on Removing an LLC Member
WA Rev Code § 25.15.131 (2022) allows a member to withdraw any time. The state previously required all the other members to vote on approving a withdrawal, but the most recent version of the law allows a member to leave at will.
There are also a few scenarios that trigger what the state calls “dissociation” from a Washington LLC. The member’s death is one, as is the transfer of all the member’s shares in the LLC to someone else. A member will also be automatically removed if a court places that member under a conservatorship, unless all other members vote to allow them to stay.
State law doesn’t have much to say about removing a member who isn’t impaired but simply doesn’t want to leave the LLC. If that’s your situation, you should be prepared to call a lawyer, because things are most likely already messy enough, and you don’t want to deal with a prolonged court battle on your own.
Update the LLC’s Membership List
Once the member has left your LLC, the job isn’t done yet. Now you need to notify the state that the composition of your LLC has changed.
The easiest way to do this is to file an amended annual report with the state. But if your last Washington annual report was filed right before the member decided to leave, you may not want to wait almost an entire year to clarify that someone is no longer involved with your LLC.
In that situation, you’ll want to submit an Amended Certification of Formation to the Washington Secretary of State’s Corporation and Charities Division. The cost to file is $30. Filing can be done online, in person, or by mail.
If you really want this person’s name off your membership list as soon as possible, you can pay an extra $50 for the state to expedite your filing. However, the expedited option is only available for filings made in person or by mail. Expedited in-person filings made before 3:30 p.m. will be processed the same day. Expedited fillings sent by mail will be processed within two or three business days (not including mailing time).
Finally, you may notice that the paperwork refers to all members as “governors.” Washington calls LLC members governors, so there’s no need to worry about that specific word.
Amend Your Operating Agreement
After you’ve notified the state, don’t forget to update your LLC’s operating agreement. Your operating agreement should detail exactly how it can be amended, so make sure to follow that procedure. The first thing you’ll want to note is that a member has left. When a member leaves, at least one other member’s membership interest will change as a result, so include that information as well. If any new members have joined, mention them and their membership interest. Once you do those things, your operating agreement will be up to date and ready to go the next time you need it.