How Does a Member Withdraw From a LLC in Maryland?

Full question:

My partner and I started an LLC here in Maryland. He left for California without notice, he then threatened to leave if I didn't give him half of the business and name him west coast CEO. I did, but this was never put on paper. We have sold only one computer, We have not done taxes for two years because we have no business model or anything written up and haven't made any money. However his name is on the paperwork for our business name 'Compulsive Technology, LLC' recently we have decided to go our separate ways and he told me 'I can have it' so he wants me to email him a contract that takes his name off of the business and his affiliation with it completely, what form should I use for this?

• Category: LLC
• Date: 04/07/2025
• State: Maryland

Answer:

The requirements will depend on the terms of the operating agreement and the facts involved. It may be necessary to amend the articles of organization, a buy-sell agreement is often recommended, and there may be promissory notes or other documents required.

The operating agreement governs the requirements and processes for your particular LLC when it comes to termination of a membership in the LLC or dissolution. Typically, a vote of the members will be required to terminate a membership and so a certain percentage of the current LLC members must approve. All termination or buyout requirements set forth in the LLC operating agreement or buy-sell agreement should be met.

A LLC typically has an operating agreement that governs the procedures for a sale of an interest in the business. It may be necessary to amend the articles of organization/certificate of formation, a buy-sell agreement is often recommended, and there may be notices of meetings, resolutions, DBA filings, promissory notes or other documents required. The operating agreement governs the requirements and processes for your particular LLC when it comes to termination of a membership in the LLC or sale. Typically, a vote of the members will be required to terminate a membership and so a certain percentage of the current LLC members must approve. All termination or buyout requirements set forth in the LLC operating agreement or buy-sell agreement should be met. In some cases, it may be helpful to have an attorney review all the facts and documents involved to ensure all requirements are complied with.

The sale of a business interest, such as in a LLC can be accomplished through a buy-sell agreement. A buy-sell agreement is an agreement between members of a LLC, partners of a partnership or between a shareholder and a corporation whereby the parties agree to the terms and conditions of a future sale of the partners or shareholder's interest. By signing the agreement, the party contractually limits his or her ability to dispose of his or her interest in the partnership or corporation to the terms of the agreement.

While the most common buy sell agreement forms are written for partnerships and corporations, they can be easily modified to suit the sale of a LLC.

Please see the following MD statutes to determine applicability:

§ 4A-606 CORPS. & ASS'NS Cessation of membership in limited
liability company.

A person ceases to be a member of a limited liability
company upon the occurrence of any of the following events:

(1) The person withdraws from the limited liability
company as provided in § 4A-605 of this subtitle;

(2) The person is removed as a member in accordance with
the operating agreement;

(3) Unless otherwise provided in the operating agreement
or with the consent of all other members, the person:

(i) Makes an assignment for the benefit of creditors;

(ii) Files a voluntary petition in bankruptcy;

(iii) Is adjudged bankrupt or insolvent or has entered
against the person an order for relief in any bankruptcy or
insolvency proceeding;

(iv) Files a petition or answer seeking for that person
any reorganization, arrangement, composition, readjustment,
liquidation, dissolution, or similar relief under any
statute, law, or regulation;

(v) Seeks, consents to, or acquiesces in the appointment
of a trustee for, receiver for, or liquidation of the member
or of all or any substantial part of the person's properties;
or

(vi) Files an answer or other pleading admitting or
failing to contest the material allegations of a petition
filed against the person in any proceeding described in this
subsection;

(4) Unless otherwise provided in the operating agreement,
or with the consent of all other members, the continuation of
any proceeding against the person seeking reorganization,
arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under any statute, law, or
regulation, for 120 days after the commencement thereof, or
the appointment of a trustee, receiver, or liquidator for the
members or all or any substantial part of the person's
properties without the person's agreement or acquiescence,
which appointment is not vacated or stayed for 120 days or,
if the appointment is stayed, for 120 days after the
expiration of the stay during which period the appointment is
not vacated;

(5) Unless otherwise provided in the operating agreement,
in the case of a member who is an individual, the
individual's:

(i) Death; or

(ii) Adjudication by a court of competent jurisdiction as
incompetent to manage the individual's person or property;

(6) Unless otherwise provided in the operating agreement,
in the case of a member who is acting as a member by virtue
of being a trustee of a trust, the termination of the trust;

(7) Unless otherwise provided in the operating agreement,
in the case of a member that is a partnership or another
limited liability company, the dissolution and commencement
of winding up of the partnership or limited liability
company;

(8) Unless otherwise provided in the operating agreement,
in the case of a member that is a corporation, the
dissolution of the corporation or the revocation of its
charter; or

(9) Unless otherwise provided in the operating agreement,
in the case of a member that is an estate, the distribution
by the fiduciary of the estate's entire interest in the
limited liability company.

§ 4A-606.1 CORPS. & ASS'NS Disposition of interest of former
member of limited liability company.

(a) Liquidation of interest. — Unless the
operating agreement provides otherwise, if the limited
liability company is not dissolved after a member ceases to
be a member under § 4A-606 of this subtitle:

(1) Within a reasonable time after a person has ceased to
be a member, the limited liability company may elect to pay
to that person or that person's successor in interest, in
complete liquidation of the person's interest, the fair value
of that person's interest in the limited liability company as
of the date the person ceased to be a member, based upon the
person's right to share in distributions from the limited
liability company; and

(2) Unless otherwise agreed, the members of the limited
liability company continuing the business following the
withdrawal of a member will be deemed to have entered into an
operating agreement under § 4A-402 of this title containing
the same terms and conditions as those contained in the
operating agreement in effect immediately prior to the
withdrawal, except that the members bound by the operating
agreement shall be only those members who have not withdrawn.

(b) Assignation of interest. — If a member ceases to
be a member under § 4A-606 of this subtitle and the limited
liability company elects not to completely liquidate that
person's interest, the person will be deemed to be an
assignee of the interest under §§ 4A-603 and 4A-604 of this
subtitle.