One of our most popular articles (How to Voluntarily Withdraw or dissociate from a Limited Liability Company LLC) dealt with the process of voluntary member withdrawal or dissociation from a limited liability company (LLC) under the Beverly-Killea Limited Liability Company Act which is set to expire at the end of 2013. The Revised Uniform Limited Liability Company Act (RULLCA) is scheduled to take its place entirely on January 1, 2014, so this article addresses changes under the new law.
The basic principles remain the same. A member can withdraw or dissociate from the LLC at any time, even if the withdraw violates the terms of the LLC’s operating agreement. No reason is needed under either Act.
A significant change concerns the withdrawal notice. Under the Beverly-Killea Limited Liability Company Act, a member must give the LLC WRITTEN notice of his/her withdrawal. Under the Revised Uniform Limited Liability Company Act, written notice is not necessary. The LLC must only receive “notice” (the RULLCA does not say “written notice”) of the person’s “express will” to withdraw in order for the dissociation to become effective. By not requiring written notice, and since an operating agreement cannot over-ride the statute, the RULLCA will likely lead to disputes over whether a member did or did not give notice of their express will to withdraw. It is advisable, therefore, that a withdrawing member always give notice in writing of their dissociation.
It is important to remember that withdrawal, dissociation, resignation, or retirement from the LLC does not terminate the withdrawing party’s equity interest in the company and does not in and of itself discharge the member of any debt, obligation, or other liability that the person incurred while a member. Also, the LLC can offset any damages from any distributions otherwise owed to the withdrawn member if the withdrawal / dissociation is in violation of the operating agreement.
If you have questions about this or any other business law topic, or need to speak with a business attorney? Contact the Tagre Law Office today.