Removing a business partner from a Limited Liability Company (LLC) is a serious legal and operational decision. Whether due to disputes, breach of contract, retirement, or performance issues, you need to follow the right steps to avoid lawsuits and business disruptions.
In this guide, we explain how to remove a business partner from an LLC, including when you can, how to do it legally, and what to avoid.
Can You Remove a Partner from an LLC?
Yes—but it depends on:
- What your Operating Agreement says
- The type of LLC (multi-member vs. manager-managed)
- Whether the partner agrees to the removal
- Your state’s LLC laws (if no Operating Agreement exists)
You can’t remove a partner without legal grounds or without following proper procedures.
Step-by-Step: How to Remove a Business Partner from an LLC
Step 1: Review the Operating Agreement
Start by reading your LLC Operating Agreement. It may include:
- Procedures for removing a member
- Required vote or consent (e.g., unanimous or majority)
- Grounds for removal (e.g., misconduct, breach of duties, inactivity)
- Buyout provisions and valuation methods
If your agreement outlines a clear removal process, follow it exactly.
Step 2: Hold a Formal Vote (If Required)
If the Operating Agreement or state law allows removal by vote, you may need:
- A majority vote of remaining members, or
- A unanimous vote, depending on your agreement or state
Document the vote in meeting minutes and prepare a written resolution.
Step 3: Offer a Buyout or Ownership Transfer
Most removals involve a buyout of the partner’s ownership interest. This can be:
- Based on a pre-agreed valuation formula
- Determined by an independent business appraiser
- Negotiated mutually
Prepare a Buy-Sell Agreement or Membership Interest Purchase Agreement to legally transfer ownership.
Step 4: Draft and Sign Removal Documents
Prepare legal documents confirming the partner’s removal, including:
- A Member Withdrawal Agreement
- A Resolution of Member Removal
- An Amended Operating Agreement
- A new Ownership Schedule (if applicable)
Ensure both parties sign and keep copies of all documents.
Tip: Get legal advice before finalizing any agreements to avoid future disputes.
Step 5: File Updates with the State (If Required)
If your state requires LLC member changes to be filed, you must:
- Amend your Articles of Organization or
- File a Statement of Information/Amendment with the Secretary of State
Check with your Secretary of State’s office to confirm the required forms and fees.
Step 6: Update Internal Records & Accounts
After the partner is removed:
- Update your Operating Agreement
- Remove the partner from bank accounts
- Notify the IRS if the tax representative changes (use Form 8822-B)
- Inform your registered agent and any vendors or clients
What If the Partner Doesn’t Want to Leave?
If your partner refuses to leave voluntarily, you may need to:
- Enforce a removal clause from the Operating Agreement
- Sue for judicial dissolution or removal in court (in extreme cases)
- Prove misconduct, breach of fiduciary duty, or abandonment
This can be expensive and time-consuming. Mediation or arbitration is often preferred before going to court.
Mistakes to Avoid
- Not having a signed Operating Agreement
- Forcing a partner out without legal cause
- Failing to document the process properly
- Not updating legal and tax records
Can You Remove a Partner from a Single-Member LLC?
By definition, a Single-Member LLC has only one owner. You cannot “remove” a partner because no other partner exists.
However, if you’re converting a multi-member LLC to a single-member LLC, you’ll follow the buyout and removal steps above, and then update your legal structure and IRS classification.
Final Thoughts
Removing a business partner from an LLC is a legal process, not just a personal decision. You need to:
- Follow your Operating Agreement
- Handle buyouts fairly
- Document everything
- Stay compliant with state filings and IRS rules
Done right, this can help your LLC move forward with clarity and legal protection.
