Removing a Member from New Hampshire LLC | Things You Need to Know


Steve Bennett
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Remove Member From New Hampshire LLC

Limited Liability Companies (LLCs) are popular business structures in New Hampshire because they provide flexibility in management and taxation while offering personal liability protection for their members. However, there may come a time when a member of an LLC needs to be removed for various reasons, such as retirement, disputes, or other personal circumstances. Removing a member from an LLC in New Hampshire can be complicated, but understanding the legal requirements and following the proper steps can help ensure a smooth transition.

This article will guide you through Removing a Member from an LLC in New Hampshire by discussing the legal requirements, preparing necessary documents, and providing helpful tips to avoid potential pitfalls.

Webinarcare Editorial Team will help you understand the process of removing a member. It would be best if all the factors in this article guided you.

What is a Limited Liability Company?

An LLC, or Limited Liability Company, is a type of business structure that offers a mix of features from partnerships and corporations. It provides its owners, known as members, with limited liability about the company’s debts or potential lawsuits, much like a corporation. At the same time, an LLC provides flexibility in management and profit distribution, similar to a partnership or sole proprietorship. LLCs can be owned by one or more individuals, corporations, or other LLCs. However, taxation in an LLC is pass-through by default, which means the profits or losses are reported on the owners’ individual tax returns.

Before you start a removing a member, it is advised that you consult with a legal expert. They will be aware of what’s best for you and your business. You can always start an LLC in New Hampshire, if you wish to protect your personal assets from business debts.

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Reasons for Member Removal in New Hampshire LLC

There could be several reasons why a member needs to be removed from an LLC in New Hampshire:

  1. Breach of Agreement: All members are bound by the operating agreement of the LLC. If a member violates the agreed terms knowingly or unknowingly, this can be a reason for removal.
  2. Financial Mismanagement: If a member is found guilty of embezzling funds or other related financial misconduct, they should be removed to protect the company’s financial health.
  3. Criminal Activity: If a member is involved in criminal activity, this can put the entire company at risk. In such cases, removal is crucial to protect the LLC’s reputation and legality.
  4. Lack of Participation: If a member consistently fails to contribute to the business, either through capital, time, or expertise, they might be removed.
  5. Conflict of Interest: An LLC’s members must prioritize the business’s interests. If a member’s activities conflict with these interests, they might need to be removed.
  6. Irresolvable Disputes: Sometimes, members might have disputes that harm the company’s functioning. Removing one or more members involved might be necessary if such disputes cannot be resolved.
  7. Personal Reasons: Personal reasons such as bankruptcy, divorce, or incapacity can also necessitate removing a member from an LLC.

Removing a member from an LLC is a legal procedure. It may require a majority vote from the other members or depend on specific LLC operating agreement clauses. Legal advice from New Hampshire Business Attorney should be sought when considering this action.

How to Remove a Member from New Hampshire LLC

To remove a member from an LLC, you must follow the guidelines that include reviewing the operating agreement, consulting with a business attorney, obtaining the consent of the remaining members, preparing and executing a written agreement, updating the operating agreement, notifying the New Hampshire Secretary of State, and updating the tax and financial records. These are the basic ones, so read the whole article until the end. 

Step 1: Review the New Hampshire Operating Agreement

The first step in removing a member from an LLC in New Hampshire is carefully reviewing the New Hampshire Operating Agreement for your LLC. The operating agreement is the document that outlines how the New Hampshire LLC will be managed and governed, including provisions for the removal of members. If the operating agreement contains specific guidelines for removing a member, those guidelines must be followed. If the operating agreement does not address the removal of members, then the default provisions under New Hampshire law will apply.

The operating agreement includes information like-

  • About Business
  • Members and management
  • Capital contribution
  • Profit Distribution
  • Change of membership
  • Dissolution

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Step 2: Consult with an Attorney

Given the potential legal and financial consequences of removing a member from New Hampshire LLC, consulting with a Business Attorney in New Hampshire before taking any action is advisable. A business attorney experienced in New Hampshire LLC law can help you understand the legal requirements, ensure compliance, and avoid potential pitfalls.

The qualities of an excellent business attorney can make a significant difference in the success and growth of your business. Here are some key qualities to look for when choosing a business attorney in New Hampshire:

  • Expertise in New Hampshire Business Law: The best business attorney should have a deep understanding of federal, state, and local laws and regulations governing businesses in New Hampshire. In terms of business laws and regulations, a business attorney should be familiar with forming of the New Hampshire Certificate of Formation so that they will guide you in regulating the New Hampshire Secretary of State and other laws that need to abide by.
  • Experience In Your Industry: An attorney with experience working with businesses in your industry will be better equipped to understand your company’s unique challenges and opportunities. They will be familiar with industry-specific regulations and can provide more targeted and relevant advice.
  • Strong Communication Skills: Effective communication is critical to a successful attorney-client relationship. A top-notch business attorney should be able to explain complex legal concepts in clear, easy-to-understand language and be responsive to your questions and concerns.
  • Proven Track Record: A great business attorney should have a history of successful client outcomes. They should be able to provide references or case studies that demonstrate their ability to achieve favorable results for businesses like yours.
  • Strategic Thinking: The best business attorney can think strategically, helping your company proactively address potential legal issues and identify opportunities for growth and success.
  • Commitment to Client Success: A truly exceptional attorney is not just focused on billable hours but genuinely committed to helping your business succeed. They should be willing to invest time and effort in understanding your company’s goals and work diligently to help you achieve them.

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Step 3: Obtain Consent of the Remaining Members

In most cases, removing a member from New Hampshire LLC requires the consent of the remaining members. This is typically achieved through a vote of the members, with the required percentage of votes needed for approval varying based on New Hampshire’s operating agreement or New Hampshire law.

If the operating agreement does not specify the percentage of votes required, you should consult your business attorney or refer to the default provisions under New Hampshire law.

Step 4: Prepare and Execute a Written Agreement

Once the required consent has been obtained, the next step is to draft a written agreement outlining the terms of the member’s removal. This agreement should include, but is not limited to:

  • The effective date of the removal
  • The reason for the removal
  • The method of calculating the member’s buyout or distribution of assets
  • Any other relevant terms or conditions

All members, including the departing member, should sign the agreement. This written agreement is evidence of the removal and can be used to update the LLC’s records and filings with the New Hampshire Secretary of State.

Step 5: Update the Operating Agreement

After removing a member, New Hampshire LLC’s operating agreement should be updated to reflect the change in membership. This may include amending the list of members, updating the ownership percentages, and revising any other relevant provisions. It is crucial to ensure that the updated operating agreement accurately reflects the current structure and governance of the LLC.

Suppose you wonder what the New Hampshire operating agreement entails. It includes the following:

  • Name of the LLC: Your LLC’s name must include the words “Limited Liability Company” or the abbreviation “LLC” or “L.L.C.” and comply with the New Hampshire LLC naming requirements. In New Hampshire, if you do not wish to file your LLC right away but want to hold the name that you have decided on, then you can reserve your LLC name for 120 days. You must file a name reservation application with the New Hampshire Secretary of State to keep the name. The online name reservation fee costs $15, while the mail name reservation fee costs $15.
  • Principal Office Address: This is where your LLC’s primary business activities will be conducted.
  • Registered Agent Information: Your Registered Agent is a person or entity designated to receive legal documents on behalf of your LLC. The Registered Agent must have a physical street address in New Hampshire. Choosing a reliable and responsible Registered Agent is essential, as failure to receive and respond to legal documents can seriously affect your business. You can serve as your Registered Agent, appoint a friend or family member, or hire a Professional New Hampshire Registered Agent Services.
  • Purpose of the LLC: This section should describe the primary purpose of your LLC and the business activities it will engage in.
  • Duration of the LLC: You may choose to have your LLC exist for a specific period or continue indefinitely.

Step 6: Notify the New Hampshire Secretary of State

Depending on the specific circumstances and requirements under New Hampshire law, you may need to file a notice of the member’s removal with the New Hampshire Secretary of State. This could involve filing the Amended New Hampshire Certificate of Formation or other appropriate documents. 

The filing fee for amending your Certificate of Formation costs $100; however, it varies depending on your specific situation and the nature of the amendments. Consult your business attorney or refer to the New Hampshire Secretary of State’s website for further guidance.

Step 7: Update Tax and Financial Records

Finally, updating the New Hampshire LLC’s tax and financial records to reflect the member’s removal is essential. This may involve notifying the Internal Revenue Service (IRS) and the New Hampshire Department of Revenue Administration and updating the bank accounts, bookkeeping, and other financial records. By profession, you can manage your finances using spreadsheets, accounting software, or becoming a CPA in New Hampshire.

Is It Important to Update the Operating Agreement?

It is important to update the operating agreement when you remove a member from your New Hampshire LLC. The operating agreement is a key document outlining your LLC’s rules, procedures, and ownership structure. When a member is removed, it is crucial to ensure that the updated operating agreement accurately reflects the current structure and governance of the LLC.

Updating the operating agreement after removing a member may include the following:

  • Amending the list of members to remove the departing member’s name
  • Updating the ownership percentages to reflect the change in membership
  • Revising any provisions related to the management, voting rights, and decision-making processes to account for the change in membership
  • Addressing any other relevant sections that may be affected by the member’s removal

By updating the operating agreement, you can maintain clear and accurate records of your LLC’s structure, which can be crucial for legal and financial reasons and the smooth operation and management of the business.

FAQs

How can a member be removed from an LLC in New Hampshire?
The process to remove a member from an LLC in New Hampshire will depend on the LLC’s operating agreement and New Hampshire law. Typically, a majority vote of the other LLC members is required to remove a member.
Can a member be forced out of an LLC in New Hampshire?
Yes, a member can be forced out of an LLC in New Hampshire with a majority vote of the other LLC members.
What is the role of the operating agreement in removing a member from an LLC in New Hampshire?
The operating agreement sets out the guidelines for how members can be removed from an LLC in New Hampshire and will determine how the process is conducted.
Can a member be removed from an LLC in New Hampshire for failure to contribute capital?
Yes, if a member has failed to contribute the required amount of capital, the other members may vote to remove them from the LLC.
Can a member be removed from an LLC in New Hampshire for breach of the operating agreement?
Yes, if a member violates the terms of the operating agreement, they can be removed from the LLC.
Can a member be removed from an LLC in New Hampshire for cause?
Yes, if a member has engaged in wrongful conduct, they may be removed from the LLC for cause.
What if there is no operating agreement for the LLC in New Hampshire?
If the LLC does not have an operating agreement that addresses member removal, New Hampshire law will apply to the process.
Can a member voluntarily withdraw from an LLC in New Hampshire?
Yes, a member can choose to voluntarily withdraw from an LLC by providing written notice to the other members.
How soon can a member be removed from an LLC in New Hampshire?
The timeframe for removing a member from an LLC in New Hampshire will depend on the specific details outlined in the operating agreement, but generally, member removal can take a few weeks to a few months.
Can a member be removed from an LLC in New Hampshire without notice?
No, members must receive notice of the vote to remove a member and be given the opportunity to defend themselves against allegations of wrongdoing.
Who needs to be notified when removing a member from an LLC in New Hampshire?
All members of the LLC in New Hampshire must be notified when a member is being removed.
Does the LLC have to buy out the member being removed in New Hampshire?
Unless the LLC’s operating agreement in New Hampshire specifically requires it, there is no legal requirement for the LLC to purchase the removed member’s membership interest.
What if the removed member disagrees with the LLC’s decision to remove them in New Hampshire?
The member can contest the decision and bring legal action against the LLC if they feel they have been wrongfully ousted.
Can a member be removed for no reason in New Hampshire?
Yes, as long as the process and reasoning behind the decision are not discriminatory, a member can be removed from an LLC in New Hampshire for any reason.
Can the member being removed in New Hampshire appeal the decision?
Yes, the removed member may appeal the decision if they feel they have been wrongly removed or if the process was not followed correctly.
Can a member be removed from an LLC in New Hampshire if they file for bankruptcy?
Depending on the LLC’s operating agreement, a member may be automatically removed from an LLC in New Hampshire if they file for bankruptcy.
Can a non-voting member be removed from an LLC in New Hampshire?
The rights of a non-voting member in an LLC in New Hampshire will depend on the LLC’s operating agreement, but generally, they can still be removed if they are in violation of the agreement.
Can a member be removed from an LLC in New Hampshire before the expiration of their term?
Yes, a member can be removed from an LLC in New Hampshire before their term expires if the circumstances warrant it.
Can a member be removed from an LLC in New Hampshire for violating state law?
Yes, if a member engages in illegal activity or violates New Hampshire state law, they can be removed from the LLC.
Can a member be removed from an LLC in New Hampshire after the LLC has been dissolved?
If the LLC has already dissolved, it is unlikely that a member could be removed. However, if the LLC has not yet officially dissolved, the member can still be removed.
Can a removed member be held liable for the LLC’s debts and obligations in New Hampshire?
Yes, even if they are no longer a member of the LLC, a removed member in New Hampshire can still be held liable for the LLC’s debts and obligations incurred while they were a member.
Can a removed member in New Hampshire demand the return of their investment in the LLC?
Depending on the circumstances, a removed member in New Hampshire may be able to demand the return of their investment, but this will depend on the details outlined in the LLC’s operating agreement.
Can a member be removed from a single-member LLC in New Hampshire?
In general, member removal for a single-member LLC will depend on the LLC’s operating agreement in New Hampshire.
Does New Hampshire law require specific procedures for member removal in an LLC?
New Hampshire law does not have specific procedures for member removal in an LLC, but typically, the operating agreement will provide the details on how this should be done.
Can a member be removed from an LLC in New Hampshire during a dispute resolution process?
Depending on the terms of the operating agreement, a member can be removed during a dispute resolution process in New Hampshire.
Are there any restrictions on who can vote to remove a member in an LLC in New Hampshire?
There may be restrictions on who can vote to remove a member in an LLC in New Hampshire, and this will typically be outlined in the operating agreement.
Can a member be removed from an LLC in New Hampshire by a simple majority vote?
Yes, unless the LLC’s operating agreement states otherwise, a simple majority vote can be used to remove a member in New Hampshire.
Can a member be removed from an LLC in New Hampshire by unanimous consent?
Yes, members of an LLC in New Hampshire may unanimously agree to remove a member from the LLC.
How many members are required for an LLC in New Hampshire?
At least one member is required to form an LLC in New Hampshire.
Can a member be removed from an LLC in New Hampshire?
Yes, a member can be removed from an LLC in New Hampshire.
Who has the power to remove a member from an LLC in New Hampshire?
The other members of the LLC have the power to remove a member from an LLC in New Hampshire.
What are the grounds for removing a member from an LLC in New Hampshire?
The grounds for removing a member from an LLC in New Hampshire depend on the terms of the LLC operating agreement.
What if there is no LLC operating agreement in New Hampshire?
If there is no LLC operating agreement in New Hampshire, the default rules in the state LLC act will apply.
What kind of notice is required before removing a member from an LLC in New Hampshire?
The notice required before removing a member from an LLC in New Hampshire depends on the terms of the LLC operating agreement.
How much notice is required before removing a member from an LLC in New Hampshire?
The amount of notice required before removing a member from an LLC in New Hampshire depends on the terms of the LLC operating agreement.
What if the operating agreement does not address removal of members in New Hampshire?
If the operating agreement does not address removal of members in New Hampshire, the state LLC act will apply.
Can an LLC member in New Hampshire be removed involuntarily?
Yes, an LLC member in New Hampshire can be removed involuntarily.
Is a vote required to remove an LLC member in New Hampshire?
Yes, a vote of the other LLC members is typically required to remove an LLC member in New Hampshire.
Can a member be removed for not meeting their financial obligations to the LLC in New Hampshire?
Yes, a member can be removed for not meeting their financial obligations to the LLC in New Hampshire.
Is the LLC required to buy out the membership interest of a removed member in New Hampshire?
It depends on the terms of the LLC operating agreement in New Hampshire.
Can a member be removed for not fulfilling their duties and obligations to the LLC in New Hampshire?
Yes, a member can be removed for not fulfilling their duties and obligations to the LLC in New Hampshire.
What is the procedure for removing a member from an LLC in New Hampshire?
The procedure for removing a member from an LLC in New Hampshire depends on the terms of the LLC operating agreement.
Is there a provision for judicial intervention in member removal cases in New Hampshire?
Yes, New Hampshire’s LLC Act provides a process for judicial intervention.
Can a court order the removal of an LLC member in New Hampshire?
Yes, a court can order the removal of an LLC member in New Hampshire if the other members follow the required procedures.
Do the procedures for removing a member from an LLC differ for a single-member versus multi-member LLC in New Hampshire?
The procedures for removing a member from an LLC do not differ for a single-member versus multi-member LLC in New Hampshire.
Can an LLC member that is also a debtor be removed in New Hampshire?
Yes, an LLC member that is also a debtor can be removed in New Hampshire.
Can an LLC member be removed for actions taken outside the LLC in New Hampshire?
It depends on the terms of the LLC operating agreement in New Hampshire.
Are there tax implications for removing an LLC member in New Hampshire?
There may be tax implications when removing an LLC member in New Hampshire, particularly if the LLC is taxed as a partnership.
Can a wrongful removal of an LLC member result in a legal dispute in New Hampshire?
Yes, a wrongful removal of an LLC member can result in a legal dispute in New Hampshire.
Can an LLC member file suit in New Hampshire for a wrongful removal?
Yes, an LLC member can file suit in New Hampshire for a wrongful removal.
Can an LLC member be removed for violating a non-compete agreement in New Hampshire?
Yes, an LLC member can be removed for violating a non-compete agreement in New Hampshire.
Can a member be forcibly removed from an LLC in New Hampshire?
It depends on the specific circumstances in New Hampshire, including the terms of the LLC operating agreement.
Can an LLC operating agreement limit the reasons for removing an LLC member in New Hampshire?
Yes, an LLC operating agreement can limit the reasons for removing an LLC member in New Hampshire.
Can an LLC member be removed for violating the company’s code of conduct in New Hampshire?
Yes, an LLC member can be removed for violating the company’s code of conduct in New Hampshire.
Can an LLC member be removed by unanimous vote in New Hampshire?
Yes, an LLC member can be removed by unanimous vote in New Hampshire.
Can an LLC member’s share be distributed among the remaining LLC members after their removal in New Hampshire?
It depends on the terms of the LLC operating agreement in New Hampshire.
Can an LLC member be removed without a vote if they resigned and agreed to a buyout in New Hampshire?
Yes, an LLC member can be removed without a vote if they resigned and agreed to a buyout in New Hampshire.

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Conclusion

Removing a member from an LLC in New Hampshire can be complex and requires careful attention to detail. By following these steps and consulting with an experienced attorney, you can ensure that your LLC remains compliant with New Hampshire law and continues to operate smoothly during this transition.

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