Removing LLC Members in Tennessee 2024: The Essential Guide

How to Remove a Member from an LLC in Tennessee

Navigating the complex waters of an LLC in Tennessee, particularly when a member leaves, can be tricky, especially in Tennessee, where unique legal hurdles exist. At LLCBase, we’re your support crew, simplifying your business journey through unchartered territories.

Exiting an LLC member necessitates careful steps to sidestep legal and financial pitfalls. Whether it is retirement, disagreement, or personal reasons, this guide will walk you through removing a member from an LLC in Tennessee. From operating agreement review, mandatory member consent, and buyout procedures to state record updates, follow this compass to a seamless transition safeguarding your company’s interests. Taking it step-by-step has never been simpler!

Remove an LLC Member

On this page, you’ll learn about the following:

Why Remove a Member From an LLC
How to Remove a Member from an LLC in Tennessee: A Guide
FAQs

Why Remove a Member From an LLC

There are various reasons why a member might need to be removed from an LLC in Tennessee, each with its own complexities and considerations. These reasons can include voluntary withdrawal, involuntary removal due to breach of agreement or misconduct, and removal due to death or incapacity. Regardless of the specific circumstances, following the proper procedures to ensure compliance with Tennessee laws and regulations to avoid potential legal disputes and complications within the business is crucial.

1. Involuntary Member Removal

Involuntary removal is often necessary when a member has breached the operating agreement, engaged in misconduct that negatively impacts the LLC, or can no longer fulfill their duties due to death or incapacity. In these situations, the remaining members must consider the company’s best interests and take appropriate action. The process for removing the member will depend on the provisions outlined in the LLC’s operating agreement, which should detail the grounds for involuntary removal and the required procedures to follow. Some common grounds for involuntary removal may include the following:

Breach of operating agreement: A member may be removed if they have breached any provisions outlined in the operating agreement, such as failing to fulfill their financial obligations or not participating in the management of the LLC as required.
Misconduct: A member may be removed for engaging in misconduct, such as fraudulent activities, theft, or any other actions that harm the reputation or financial stability of the LLC.
Death or incapacity: If a member dies or becomes incapacitated and can no longer perform their duties, the remaining members may need to remove them and address the transfer of their ownership interest to ensure the continued operation of the LLC.

2. Voluntary Member Removal

Voluntary removal occurs when a member leaves the LLC for personal or professional reasons, such as pursuing other business opportunities, retirement, or resolving personal conflicts within the company. In this case, the remaining members should follow the procedures outlined in the operating agreement for voluntary withdrawal. This typically includes obtaining consent from the required members, determining the buyout or redemption of the departing member’s interest, and updating the LLC’s records and state filings to reflect the change in membership. Some key steps in the voluntary removal process may include:

Providing notice: The departing member should provide adequate notice of their intention to withdraw, as specified in the operating agreement or as required by Tennessee law.
Obtaining consent: Depending on the operating agreement’s provisions, the remaining members may need to vote on and approve the voluntary withdrawal of the departing member.
Determining buyout or redemption: The operating agreement should outline the process for determining the buyout or redemption of the departing member’s interest, including any valuation method and payment terms.
Updating records and filings: The LLC must update its operating agreement, membership ledger, and any relevant state filings to reflect the member’s departure and the subsequent changes in ownership interests.

Check out our curated selection of best business attorneys in Tennessee! They specialize in scrutinizing LLC Operating Agreements and can assist in the smooth transition of removing a member from your Limited Liability Company. Partner with the best to ensure reliable, professional handling of your company’s vital changes.

LLC Services	Rating & Pricing	Top Features	Learn More
#1 Editor's Choice	5/5 $0 + State Filing Fee	Free LLC Formation Various Legal Services Attorney Advice	Learn More
	3/5 $299 + State Filing Fee	Single Package Flat Pricing Legal Services	Learn More

How to Remove a Member from an LLC in Tennessee: A Guide

Navigating the complexities of member removal from an LLC in Tennessee? No need to worry; we’ve outlined the key steps for you. The process may seem daunting, but with the right knowledge, you’ll be able to handle the transition smoothly. Here’s a step-by-step guide to help you.

Step 1: Review the LLC Operating Agreement

The operating agreement drafted before starting a business in Tennessee serves as the primary governing document for an LLC in Tennessee, outlining each member’s rights, duties, and obligations. When removing a member from the LLC, consulting the operating agreement for guidance on the proper procedures and requirements is essential. Here are the common provisions in operating agreements that address member removal

Voluntary withdrawal: The operating agreement may outline specific procedures for a member who wishes to voluntarily withdraw from the LLC, such as providing written notice and obtaining consent from required members.
Involuntary removal due to breach of agreement or misconduct: The operating agreement may specify grounds for involuntary removal and the voting requirements and processes for removing a member.
Removal due to death or incapacity: The operating agreement may address the removal of a member due to death or incapacity, including procedures for determining the buyout or redemption of the member’s interest.

Suppose the operating agreement does not guide member removal. In that case, the members should consult Tennessee’s default LLC laws and regulations or seek the assistance of an attorney or professional to ensure compliance.

Recommended: We strongly recommend engaging the services of a legal professional to scrutinize the LLC Operating Agreement when a member is to be removed from the LLC. This is a savvy move to ensure a smooth transition. We recommend –
Our #1 Pick: LegalZoom – ($0 + State Fees) Online LLC Setup

Step 2: Obtain Consent from Required Members

Determine the voting requirements for member removal as outlined in the LLC’s operating agreement.

Majority vote: The operating agreement may require a simple majority vote of the remaining members to remove a member.
Supermajority vote: The operating agreement may require a higher threshold, such as a two-thirds or three-quarters vote, to remove a member.
Unanimous consent: In some cases, the operating agreement may require the unanimous consent of all remaining members to remove a member.

Hold a Formal Meeting to Vote

Conducting a formal meeting to vote on removing a member from an LLC in Tennessee is crucial in ensuring the process is carried out legally and fairly. This meeting should adhere to the guidelines outlined in the operating agreement or follow the requirements set forth by Tennessee law, ensuring that all members can voice their opinions and participate in decision-making.

Provide Proper Notice of the Meeting: To hold a formal meeting for member removal, proper notice must be given to all members of the LLC. This notice should include the meeting’s date, time, and location and the specific purpose of discussing and voting for removing the member. The method and timeframe for providing notice should adhere to the requirements outlined in the operating agreement or the default rules set by Tennessee law.
Record the Meeting Minutes and Vote Results: During the meeting, keeping accurate records of the proceedings, including any discussions related to the member removal and the vote results, is essential. The meeting minutes should detail the reasons for the member’s removal, the voting process, and the final decision reached by the members. Ensure that the proper voting requirements, as specified in the operating agreement or by Tennessee law, are met and accurately documented in the minutes.

Obtaining signatures from all necessary parties is crucial if the operating agreement requires written consent to remove a member. This written consent should include the specific reasons for the member’s removal, the results of the vote, and any other relevant information outlined in the operating agreement.

Once signed, the written consent should be properly stored and maintained with the LLC’s records. It is an important legal document reflecting the members’ agreement to remove the member in question. This document may be required in future disputes or legal proceedings regarding removing the member from the LLC in Tennessee.

Step 3: Determine the Buyout of the Member’s Interest

When removing a member from an LLC in Tennessee, addressing the buyout or redemption of their ownership interest in the company is crucial. This process should be guided by the provisions outlined in the LLC operating agreement, ensuring that all parties involved are treated fairly and under the agreed-upon terms.

Review the Operating Agreement

Fixed price buyout: The operating agreement may specify a fixed price for a departing member’s interest buyout, ensuring all parties know the removal’s financial implications.
Valuation method: The operating agreement may outline a specific valuation method for determining the buyout or redemption price, such as appraisal, book value, or capitalization of earnings. This method should be agreed upon by all members and applied consistently to ensure a fair and accurate valuation of the removed member’s interest.

Negotiate a Buyout or Redemption Agreement

Determine the payment terms: To facilitate a smooth transition, the payment terms for the buyout or redemption should be negotiated and agreed upon by both the removed and the remaining members. This may include options such as a lump sum payment, installment payments over a specified period, or a promissory note outlining the repayment terms.
Establish a timeline for the completion of the buyout or redemption: To maintain the stability and continuity of the LLC, it’s essential to establish a clear timeline for the completion of the buyout or redemption process. This timeline should consider any deadlines specified in the operating agreement and ensure that all parties remain informed and engaged throughout the process.

Execute the Buyout Agreement

Once the buyout or redemption agreement has been negotiated and agreed upon, it should be properly executed by all relevant parties. This includes obtaining signatures from the removed member and the remaining members, and any necessary witnesses or legal representatives.

After the agreement has been executed, update the LLC’s records to reflect the transfer of the removed member’s interest to the remaining members of the LLC itself. This may involve updating the membership ledger, amending the operating agreement, and filing any required documents with the Tennessee Secretary of State to ensure compliance with state laws and regulations.

Step 4: Update the LLC Records and State Filings

Once the member has been removed and their interest has been bought out or redeemed, ensure that the operating agreement is amended to reflect these changes. This may include updating ownership percentages and removing any references to the departing member.

The membership ledger, which records the names and ownership interests of all LLC members, should be updated to remove the removed member and reflect any changes in ownership interests resulting from the buyout or redemption.

File the Required Documents

Statement of Information or Annual Report updates: If the removal of the member requires updates to the Tennessee LLC’s Statement of Information or Annual Report, file the necessary documents with the Tennessee Secretary of State and pay $50 per member fee.
Amended Certificate of Authority, if required: In some cases, removing a member may necessitate filing Amended Certificate of Authority with the Tennessee Secretary of State, along with the required $100 for online and by mail filing.

Recommended: Keep your filings flawless with an LLC service! From annual report updates to potential Amended Certificate of Authority, they will handle the specifics so you can focus on the business. We recommend –
Our #1 Pick: LegalZoom – ($0 + State Fees) Online LLC Setup

After the member has been removed and all necessary documents have been filed with the Tennessee Secretary of State, it’s important to notify any relevant parties of the change in membership, including banks, creditors, and clients.

FAQs

What is an LLC in Tennessee?

An LLC (Limited Liability Company) is a business structure that combines the flexibility and simplicity of a partnership with the limited liability protection of a corporation in Tennessee.

Can an LLC remove a member in Tennessee?

Yes, an LLC in Tennessee can remove a member, subject to the terms and procedures set forth in the operating agreement.

What is an operating agreement in Tennessee?

An operating agreement is a legal document that governs the operations and management of an LLC in Tennessee.

What should be included in an operating agreement in Tennessee?

An operating agreement in Tennessee should include the LLC’s management structure, members’ rights and obligations, allocation of profits and losses, and procedures for adding or removing members, among other things.

What is the process for removing a member from an LLC in Tennessee?

The process for removing a member from an LLC in Tennessee depends on the terms of the operating agreement and applicable state laws.

Is there a legal requirement for LLC to have an operating agreement in Tennessee?

No, there is no legal requirement for an LLC in Tennessee to have an operating agreement, but it is highly advisable to have one to avoid disputes later.

Who can initiate the process of removing a member in Tennessee?

An LLC member, either voluntarily or through a court process, can initiate the process of removing a member under the terms of the operating agreement in Tennessee.

Can an LLC dissolve with member vote in Tennessee?

Yes, an LLC can dissolve with a member’s vote in Tennessee.

What is the percentage of members voting needed to remove a member in Tennessee?

The percentage of members voting needed to remove a member of an LLC in Tennessee depends on the terms set forth in the operating agreement.

Can a member be removed without cause in Tennessee?

Yes, a member can be legally removed from an LLC without cause if the operating agreement states so in Tennessee.

Can an LLC remove a member approved by the Tennessee Secretary of State?

Yes, an LLC in Tennessee can remove a member approved by the Secretary of State if the operating agreement allows so.

Are the LLC member’s right enumerated by law in Tennessee?

No, the LLC member’s right is typically outlined in the operating agreement for an LLC in Tennessee.

Can an LLC in Tennessee be dissolved without unanimity among the remaining members?

Yes, an LLC in Tennessee can be dissolved without unanimity among the remaining members if specified in the operating agreement.

Does TN LLC law govern mechanisms or terms of member removal/exit?

Yes, Tennesse’s LLC law will govern mechanisms or terms of member removal/exit unless stated in the operating agreement.

Can members of an LLC agree to waive withdrawal rights in Tennessee?

Yes, members of an LLC in Tennessee can agree to waive their withdrawal rights in the operating agreement.

What happens to the banned members’ ownership percentage?

The membership percentage of a removed member in Tennessee will be distributed differently according to the operating agreement.

Can a member trade cease in Tennessee during the process of removal?

In Tennessee, a member’s trading may be stopped during the process of removal according to the operating agreement or court order.

Do TN courts decide disputed issues while removing a member in Tennessee?

Yes, the court in Tennessee may decide disputes that arise during the process of removing a member, as described in the LLC’s operating agreement.

Can a buyout be part of the member removal proceeding in Tennessee?

Yes, the buyout offers could be a negotiation between parties during the proceedings of the member removal presented in TN.

Can termination immediately eliminate the removed member’s contractual responsibilities in Tennessee?

Termination in Tennessee would only eliminate a member’s future responsibilities. The previous debt and liability of the member in the LLC would still have accountability based on shared involvement and conducting lawfully ethical procedures promulgated in the relevant documents.

Can the page restriction be enforced equitably by the court concerning the minority shareholder’s withdrawal in Tennessee?

The provision included by the operating agreement responsible for removing members restricted under a certain clause can sometimes be imposed sustained legally only in the minority condition or situation in Tennessee.

Does assigning the expelled member as a person or employer can commonly be part of resolving an LLC buyout dispute in Tennessee?

Commonly, assigning an expelled member as an employee/ person won’t be part of a terminated transaction resolution procedure during removing Tennessee LLC members.

Can a member in Tennessee who objects to the removal sue the LLC?

Yes, a member who objects to the removal in Tennessee can sue the LLC based on contract terms valid in the LLC’s operating Indiana.

Are capital accounts rewritten during the removal operation in Tennessee?

In Tennessee, the capital accounts are typically and must be revamped after similar terminated proceedings, among other related considerations or rulings provided in the operating agreement.

Are the end-of-year tax planning files required in Tennessee during member removal process?

End-of-year tax suggestions in Tennessee for members to remove members relying on fiscal provision and allocation could be useful and recommended but not required.

What circumstances signify involuntary removal from an LLC in Tennessee?

Involuntary removal from an LLC member can occur in specific situations involving illicit payment bills, tax evasions actions, or engaging in detrimental acts, etc.—these could serve as basis for expelling unlawful members after precise proceedings as noted in their signed and authenticated operating agreement.

Can filing bankruptcy eliminafe membee expsfionninetx in Tennessee?

Transporting from bankruptcy in Tennessee entirely stands as unaffected influence during member removal proceedings sanctioned by the Membership agreement.

Will notifications receive to deregister a foreign LLC to remove the Tennesseemanagement group?

TSRs (Termination and Appointments) papers may sometimes list reasons ranging such as foreign details’, legality, assignments inconsistent with laws—from commercial businesses planned a-la-lixer LLC can cause preemptory lawsuits removed under offenses warranted by careful legislative select precautions and operations guaranteed by provisos signaled in the operating LLC’s memos.

Can I remove a member from my LLC in Tennessee?

Yes, you can remove a member from your LLC in Tennessee if you follow the statutory requirements and the terms of your operating agreement.

Why would I need to remove a member from my LLC in Tennessee?

There are various reasons to remove a member from an LLC in Tennessee, such as their misconduct, inactivity, disagreement on goals or values, or changes in ownership or management structure.

What is the difference between an operating agreement and the Tennessee LLC Act?

The operating agreement is a private document that outlines the internal rules, roles, and responsibilities of the LLC members, while the Tennessee LLC Act is a public law that sets out the basic requirements and operations of an LLC.

Do LLC members have to sign and agree to the operating agreement in Tennessee?

Yes, all LLC members in Tennessee should sign and agree to the operating agreement, which can be a written or verbal agreement.

Who has authority to remove a member from an LLC in Tennessee?

The Tennessee LLC Act and the operating agreement determine who has the authority to remove a member from an LLC, which can be the manager, the members, or a court order.

Do I need a reason to remove a member from my LLC in Tennessee?

Generally, you do not need a specific reason to remove a member from an LLC in Tennessee, unless the operating agreement or the Tennessee LLC Act requires one.

How do I determine the voting rights of the members for removal in Tennessee?

You should check the operating agreement and the Tennessee LLC Act to determine the voting rights of the members, which can be based on their ownership percentage, type of membership, or other factors.

Can I remove a member without a unanimous vote in Tennessee?

It depends on the operating agreement and the Tennessee LLC Act, which may require a unanimous vote, a two-thirds vote, a simple majority vote, or a different standard for member removal.

Can I remove a member who has invested more money in the LLC in Tennessee?

The amount of money a member has invested in the LLC is not a determining factor for member removal in Tennessee, unless specified in the operating agreement or the Tennessee LLC Act.

How do I notify the member of their removal from the LLC in Tennessee?

You should follow the notice requirements stated in the operating agreement and the Tennessee LLC Act, which typically involve sending a written notice by certified mail to the member’s last known address.

What happens to the member’s interest in the LLC if they are removed in Tennessee?

The member’s interest may be bought out by the LLC or other members, dissolved, divided among the remaining members, or transferred according to the operating agreement and the Tennessee LLC Act.

Can a member be held liable for the LLC’s debts and obligations after their removal in Tennessee?

Generally, a member is not liable for the LLC’s debts and obligations after their removal in Tennessee, unless certain conditions are met, such as their prior knowledge of the acts that caused liability, their wrongful conduct, or other legal requirements.

Can I remove myself as a member from an LLC in Tennessee?

Yes, you can remove yourself as a member from an LLC in Tennessee, but you may need to follow the operating agreement and the Tennessee LLC Act and fulfill your obligations to the LLC.

Can a court order the removal of a member from an LLC in Tennessee?

Yes, a court can order the removal of a member from an LLC in Tennessee under certain circumstances, such as their breach of fiduciary duties, their harm to the LLC’s business and reputation, or their illegal acts.

Can a member sue the LLC after their removal in Tennessee?

A member can sue the LLC after their removal in Tennessee if they have a legal basis for the lawsuit, such as breach of contract, breach of fiduciary duty, or illegal activity.

Can a member sell their interest in the LLC before they are removed in Tennessee?

Yes, a member can sell their interest in the LLC before they are removed, but the buyer may become subject to the removal provisions of the operating agreement and the Tennessee LLC Act.

Can I remove a member who has signed a multi-year contract in Tennessee?

If the multi-year contract involves the member’s operating agreement or the Tennessee LLC Act, or their continued membership rights, you may need to comply with the terms of the contract and seek legal advice before removing the member.

Can I remove a member without proper notice or opportunity for hearing in Tennessee?

Removing a member without proper notice or opportunity for hearing may expose you to legal consequences in Tennessee and may violate the operating agreement and the Tennessee LLC Act.

Can I remove a member who is also a managing member in Tennessee?

The removal of a managing member may require following specific procedures and satisfying certain standards under the operating agreement and the Tennessee LLC Act, which may differ from those of a non-managing member.

Can I remove a member who has filed a lawsuit against the LLC in Tennessee?

Filing a lawsuit against the LLC does not automatically disqualify a member from membership, but you may need to seek legal advice and follow the operating agreement and the Tennessee LLC Act before removing them.

Can I remove a member who has filed for bankruptcy in Tennessee?

Filing for bankruptcy as an individual does not preclude a member from membership, but it may affect their ability to contribute capital or participate in the management of the LLC, depending on the operating agreement and the Tennessee LLC Act.

Can I remove a member who has violated the confidentiality terms of the operating agreement in Tennessee?

Violating the confidentiality terms of the operating agreement may constitute misconduct, and you may need to follow the removal procedures and remedies outlined in the operating agreement and the Tennessee LLC Act.

Can I remove a member without compensating them for their interest in the LLC in Tennessee?

Removing a member without compensating them for their interest in the LLC may trigger legal and financial consequences under the operating agreement, the Tennessee LLC Act, and other laws, such as breaching fiduciary duties or fair dealing standards.

Who can I consult for legal advice on removing a member from my LLC in Tennessee?

You can consult a licensed and experienced attorney who is familiar with the Tennessee LLC Act and the operating agreement to help you navigate the process of removing a member from your LLC in Tennessee.

Can I use mediation or arbitration to resolve disputes with a member before resorting to member removal in Tennessee?

Yes, using mediation or arbitration to resolve disputes may help you maintain a positive and efficient business relationship with the member, and may avoid the legal and financial costs of member removal in Tennessee.

Conclusion

Successfully removing a member from an LLC in Tennessee requires careful attention to the operating agreement, obtaining necessary consents, addressing buyout or redemption terms, and updating the LLC’s records and state filings. Adhering to proper legal procedures and updating essential documents is critical to avoid legal disputes, financial issues, and potential penalties from the Tennessee government.

Given the complex nature of the process and the risks associated with non-compliance, consulting an attorney or professional is highly recommended to help you navigate the requirements and procedures of removing a member from an LLC in Tennessee. Ensure a seamless transition for your business by seeking expert guidance. Visit LLCBase today to access valuable resources and support tailored to your needs.