How to Remove a Governing Officer From an LLC

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Officer removals can involve a staff change or an owner withdrawal.
Officer removals can involve a staff change or an owner withdrawal. (Image: Jupiterimages/Photos.com/Getty Images)

A governing officer of a limited liability company (LLC), more commonly known as the manager, can be an employee of the company or an owner. Removing a manager who is an employee of the company is a simple matter of changing paperwork. Removing a manager is also an owner, known as a managing member, is much more complicated if the removal is part of the member withdrawing from the company entirely. The process for member withdrawals from an LLC is determined by state law. Some states prohibit withdrawal of LLC members and mandate the dissolution of the company if any of the members want to leave the business.

Amend the LLC registration filings with the state if you are removing a manager who is an employee or removing a managing member who is retiring from the position but not withdrawing as an owner of the business. States require LLCs to file articles of organization to officially form the business and obtain authorization to operate. Some states, such as Nevada, require the LLC to indicate the names and addresses of any managers or of the managing member in the articles. Some states also require the LLC to file an updated list of managers every year. Check your copy of the LLC articles to see if the manager is listed. Check the state's business registration website to see if it requires the LLC to keep a current list of managers on file with the state. If either of these scenarios apply, use the state's website to file an amendment to the articles or an updated managers list.

Change the LLC internal business records to reflect the removal of the existing manager and the appointment of a new manager, if the change is not an ownership change. Update the company's operating agreement, if necessary, and any lists or public displays of authority. The manager is the person authorized to conduct business on behalf of the LLC. He will typically be listed as the point person on all written materials.

Contact all external accounts and change the LLC's manager. The manager serves as the point person for bank and vendor accounts and any other business relationship that exist in the name of the company. You will likely need to show some official document indicating the change is authorized, such as a stamped copy of the current manager list filed with the state, the amended articles of organization or a resolution signed by the owners of the LLC.

Compare the provisions of the LLC operating agreement, if one exists, with the member withdrawal provisions of the state's LLC statute if the retiring manager is a member who is also leaving the company. Some states treat LLCs like partnerships. If a partner wants to leave, it automatically dissolves the partnership. If the remaining partners want to continue on, they have to set up a new company. If the state does not mandate dissolution, buy out the withdrawing member's interest in accordance with the operating agreement or the default provisions of state law if no operating agreement exists. Then, change the state filings, the internal records and the external accounts to reflect a new manager in the position.

File state and federal tax returns, indicating a change in ownership percentage if the retiring manager was also a withdrawing owner. Tax returns require the company to account for changes to the capital accounts of owners and the way profits and losses are allocated. LLC ownership structure is private, and the tax returns are the only places it would have to account for changes in ownership upon removing a managing member.

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