Q: A business partner and I previously formed a Limited Liability Company, but I have decided it is time for me to move on. What is the legal way to remove myself from this business?
A: Starting a new business can be an exciting accomplishment, but eventually one or more of the co-founders may decide to leave the business. Whatever the motivation—new opportunities, conflict with other business partners, or simply to free up some leisure time—if you want to leave a Limited Liability Company, you should be careful to do so in the correct, legal way.
New Hampshire law contains a lengthy statute governing LLCs, RSA chapter 304-C. The statute contains a specific section, RSA 304-C:103, governing member withdrawals; “withdrawal” is the legal term for the act of voluntarily removing oneself from an LLC. Under RSA 304-C:103, a member of an LLC generally may withdraw from the LLC at any time by giving 30 days’ written notice to the other members.
Despite the apparent simplicity of RSA 304-C:103, giving 30 days’ written notice may not actually result in your successful withdrawal from the LLC. This is because, despite the extensive legal structure found in RSA chapter 304-C, many of the sections give deference to the document that created the LLC—the operating agreement. This is true for RSA 304-C:103, which twice defers to the operating agreement: “Unless the operating agreement provides otherwise, a member may withdraw from a limited liability company at any time by giving 30 days’ written notice to the other members, or such other notice as is provided for in writing in the operating agreement.”
Consequently, if you want to leave an LLC you should consult the LLC’s operating agreement. The operating agreement may specify a process for withdrawal or other limitations on withdrawal that differ from RSA 304-C:103, in which case the operating agreement would likely control, and if you attempt to withdraw by following the process in RSA 304-C:103, you may later find that you have not actually withdrawn at all. This could have significant consequences if there were other obligations you failed to comply with because you thought you had withdrawn.
An operating agreement can be a very legally technical document. If you wish to withdraw from an LLC and you have any questions about what the operating agreement requires, you should seek advice from an attorney with experience in LLC law.
Know the Law is a bi-weekly column sponsored by McLane Middleton. Questions and ideas for future columns should be emailed to email@example.com. Know the Law provides general legal information, not legal advice. We recommend that you consult a lawyer for guidance specific to your particular situation.