Removing a Business Partner's Name from Your LLC

Question: Melisa, Baltimore, Md.
I opened my LLC business with a partner: I am the resident agent and she is on our LLC application as my partner. Since she is no longer part of my business, how do I remove her name?

Answer:

Partnerships end, sometimes contentiously, sometimes not. Either way, there are two primary sources you can turn to for information about how to terminate your partner's interest in your limited liability company.

First, check your LLC's operating agreement. The operating agreement you entered into prior to forming your LLC should provide, in some detail, the procedure for removing a partner from your LLC. In addition, your operating agreement should outline the rights and responsibilities of each partner -- outgoing and remaining -- following the removal.

You may, for instance, be required to pay the outgoing partner the fair value of her interest in the LLC. If your operating agreement contains such a provision, and you feel that the outgoing partner is not entitled to compensation because she failed to fulfill her duties, your remedy would most likely be to sue her for breach of contract.

If you did not adopt an operating agreement when you formed your LLC, the procedure for removing a partner will be governed by state law. In your case, assuming you formed the LLC under the laws of your home state, you would turn to the laws of Maryland. Specifically, you're interested in the Maryland Limited Liability Company Act.

If your partner consents to being removed from the LLC and there are no issues in dispute, you and your partner can simply amend your articles of organization. You do this by executing and filing articles of amendment with the Maryland Secretary of State. A form is available on the Secretary's Web site. The form must state the name of your LLC, set forth how the charter of your LLC is being amended, and contain the signatures of all authorized persons. A filing fee (currently $100) must accompany the form to complete filing.

Under Maryland law, a limited liability company need only have one member, so you will be able to continue your business as an LLC in your capacity as resident agent. You will also have to assume the duties of your outgoing partner.

In the future, you may add members to your limited liability company, with or without their making contributions or acquiring an interest in it. In Maryland, an LLC is dissolved upon the happening of an event specified in the articles or operating agreement; at a time specified by the unanimous consent of the members; upon entry of a judicial order; or when the LLC has no members for 90 consecutive days.

Of course, if there are any issues in dispute, you should consult a Maryland attorney prior to amending your articles and removing your partner from the LLC. An attorney can guide you through the legal process and help to resolve any and all conflicts that may arise. Many attorneys offer free initial consultations to learn the facts and assess your case. Be sure you know and understand the attorney's policies on legal fees prior to allowing him or her to begin work on your case.

This article is intended for informational purposes only and is not a replacement for professional legal advice. Always consult an attorney prior to taking any kind of legal action.