Legal Question in Business Law in New Jersey

Re: add/remove member to an LLC

I have read the answer from the other attorney.

I think you can now understand why people hire lawyers to do this kind of work. Because you need to, to prevent problems later.

Please hire an attorney (it really should not be too expensive) and get some assistance. Or do it yourself, and hope for the best. If it goes wrong, then the results will not be what you wanted, and you will pay some person like me thousands of dollars to fix it instead of hundreds of dollars to do it right in the first place.

Call me if you would like me to help.

Re: add/remove member to an LLC

While the question that you presented had no factual informnation, John's reply seems complete, but let me add one more thing: You have not indicated whether or not there are problems leading up to the removal, or if it is involuntary or merely voluntary, why it is being done, or how many members there are in the LLC and what percentage is involved. A simple way, if all parties are in agreement, and there are no valuation questions or buy-out requirements, if just to have the current member assign his/her interest to the proposed new member, and have the assignment approved by the remaining members. For example, I have done this where a current member died and his estate was being replaced in his place. More information is needed to provide a better and complete reply.

Re: add/remove member to an LLC

If you have an Operating Agreement (and you should) that agreement will answer your question. You should consult the lawyer who drafted the agreement for the Company.

If you do not have an Operating Agreement, the default provisions of your State's LLC statute will probably answer the question. In NJ, a member may resign and is thereafter entitled to his share of the distributions of the LLC and is also entitled to the return of the FMV of his company interest less applicable "valuation discounts" after a reasonable time.

Similarly, a new member may be admitted in accordance with the Operating Agreement or, if there is no OA provision, with the unanimous consent of the other members. The new member does not necessarily have to contribute value to acquire his company interest but, if he does not, there may be tax consequences.

There is no statutory provision to "remove" a member other than by resignation, death, or declaration of incompetence. If the members cannot agree on the management of the LLC and no one will voluntarily resign, any member may petition the court for a dissolution of the company.

Those defaults opt very heaviliy in favor of preserving the property of an individual member and not necessarily in favor of the continued operation of a going concern. That is one reason why most LLCs should have an Operating Agreement that is written for their own particular purposes.

If I can be of further help to you, call or email.

See also: http://info.corbettlaw.net/lawguru.htm