Removing a Member from Ohio LLC | Things You Need to Know


Steve Bennett
Steve Bennett
Business Formation Expert
Hi there, I'm Steve. My mission is to empower the next generation of online entrepreneurs with the knowledge and tools they need to succeed. My business insights are based on real-world experience, ensuring that aspiring entrepreneurs can confidently start and run their own businesses.

All Posts by Steve Bennett →
Business Formation Expert  |   Fact Checked by Editorial Staff
Last updated: 
WebinarCare offers informative content for educational purposes only, not as a substitute for professional legal or tax advice. We may earn commissions if you use the services we recommend on this site.
WebinarCare is led by Steve Bennett, a seasoned expert in the business world. He's gathered a team that's passionate about giving you reliable advice on everything from starting a business to picking the right tools. We base our tips and guides on real-life experience, ensuring you get straightforward and proven advice. Our goal is to make your business journey smoother and more successful. When you choose WebinarCare, you're choosing a trustworthy guide for all things business.
Remove Member From Ohio LLC

Limited Liability Companies (LLCs) are popular business structures in Ohio 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 Ohio 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 Ohio 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 Ohio, if you wish to protect your personal assets from business debts.

WEBINARCARE EDITORIAL TEAM

Reasons for Member Removal in Ohio LLC

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

  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 Ohio Business Attorney should be sought when considering this action.

How to Remove a Member from Ohio 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 Ohio 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 Ohio Operating Agreement

The first step in removing a member from an LLC in Ohio is carefully reviewing the Ohio Operating Agreement for your LLC. The operating agreement is the document that outlines how the Ohio 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 Ohio law will apply.

The operating agreement includes information like-

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

Recommended: Creating an Operating Agreement is like having a personal legal guide at hand; it’s efficient, thorough, and ensures the smooth and compliant operation of your business. With LegalZoom’s operating agreement, it will protect your rights as an owner, keeping misunderstandings at bay and your business on the path to success. That’s why we recommend using –

LegalZoom – Starts at $99

Step 2: Consult with an Attorney

Given the potential legal and financial consequences of removing a member from Ohio LLC, consulting with a Business Attorney in Ohio before taking any action is advisable. A business attorney experienced in Ohio 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 Ohio:

  • Expertise in Ohio Business Law: The best business attorney should have a deep understanding of federal, state, and local laws and regulations governing businesses in Ohio. In terms of business laws and regulations, a business attorney should be familiar with forming of the Ohio Articles of Organization so that they will guide you in regulating the Ohio 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.

If you plan to hire the Best Business Attorney for your Ohio LLC, we reviewed these services for you to check out.

LLC Service

Rating & Price

Top Features

Learn More

#1 Recommendation

$39.09/month

  • Attorneys in all states

  • Hire Business Attorneys

  • Other legal services

$239.99/year

  • Single Subscription

  • Business attorneys

  • 30-min consultation 

Step 3: Obtain Consent of the Remaining Members

In most cases, removing a member from Ohio 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 Ohio’s operating agreement or Ohio 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 Ohio 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 Ohio Secretary of State.

Step 5: Update the Operating Agreement

After removing a member, Ohio 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 Ohio 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 Ohio LLC naming requirements. In Ohio, 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 some time. You must file a name reservation application with the Ohio Secretary of State to keep the name. The online name reservation fee costs $39, while the mail name reservation fee costs $39.
  • Principal Office Address: This is where your LLC’s primary business activities will be conducted.
  • Statutory Agent Information: Your Statutory Agent is a person or entity designated to receive legal documents on behalf of your LLC. The Statutory Agent must have a physical street address in Ohio. Choosing a reliable and responsible Statutory Agent is essential, as failure to receive and respond to legal documents can seriously affect your business. You can serve as your Statutory Agent, appoint a friend or family member, or hire a Professional Ohio Statutory 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 Ohio Secretary of State

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

The filing fee for amending your Articles of Organization costs $99; however, it varies depending on your specific situation and the nature of the amendments. Consult your business attorney or refer to the Ohio Secretary of State’s website for further guidance.

Step 7: Update Tax and Financial Records

Finally, updating the Ohio 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 Ohio Department of Taxation 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 Ohio.

Is It Important to Update the Operating Agreement?

It is important to update the operating agreement when you remove a member from your Ohio 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

What is the process of removing a member from an LLC in Ohio?
The process of removing a member from an LLC in Ohio involves amending the operating agreement, obtaining the required consents, and updating paperwork with the Ohio Secretary of State’s office.
Can an LLC member be removed without their consent in Ohio?
An LLC member cannot be removed without their consent in Ohio, except under extreme circumstances such as fraud, wrongful conduct, or illegal activity.
Who has the power to remove a member from an LLC in Ohio?
The members of the LLC have the power to remove a member from an LLC in Ohio, as laid out in the operating agreement.
What happens to a member’s share in an LLC once they are removed in Ohio?
Once a member is removed from an LLC in Ohio, their share is either bought out or redistributed to the remaining members, as specified in the operating agreement.
Is there a formal process for removing a member from an LLC in Ohio?
Yes, there is a formal process for removing a member from an LLC in Ohio, which involves amending the operating agreement and updating state paperwork.
What is the timeline for removing a member from an LLC in Ohio?
The timeline for removing a member from an LLC in Ohio can vary depending on the circumstances, but typically takes a few weeks to a few months.
How much does it cost to remove a member from an LLC in Ohio?
The cost of removing a member from an LLC in Ohio depends on the complexity of the process and the assistance of legal professionals, but can range from a few hundred to a few thousand dollars.
Does the removal of a member affect the LLC’s tax classification in Ohio?
The removal of a member may affect the LLC’s tax classification in Ohio, depending on the terms of the operating agreement and the remaining members’ ownership percentages.
Can a member be removed from an LLC retroactively in Ohio?
No, a member cannot be removed from an LLC retroactively in Ohio.
Can a member be removed from an LLC for inactivity in Ohio?
Yes, a member can be removed from an LLC for inactivity in Ohio if it is specified in the operating agreement and the necessary consents are obtained.
What role does the Ohio Secretary of State’s office play in removing a member from an LLC?
The Ohio Secretary of State’s office must be notified of any changes to the LLC’s membership, including the removal or addition of a member.
Is a formal meeting required to remove a member from an LLC in Ohio?
A formal meeting is not always required to remove a member from an LLC in Ohio, but it is often recommended to ensure that all necessary consents and processes are followed.
Can a non-member initiate the process of removing a member from an LLC in Ohio?
No, only members of an LLC in Ohio can initiate the process of removing a member.
Can the operating agreement of an LLC in Ohio be amended to include provisions for removing a member after disputes arise?
Yes, the operating agreement of an LLC in Ohio can be amended to include provisions for removing a member after disputes arise.
Can the removal of a member in an LLC in Ohio be appealed?
Yes, the removal of a member in an LLC in Ohio can be appealed if there is evidence of fraud, misconduct, or illegal activity.
Is there a waiting period after initiating the process of removing a member from an LLC in Ohio?
There is no formal waiting period after initiating the process of removing a member from an LLC in Ohio, but the process may take several weeks or months to complete.
Is the removal of a member from an LLC in Ohio permanent?
Yes, the removal of a member from an LLC in Ohio is permanent unless there is a successful appeal or the former member is reinstated.
Can a member be removed from an LLC in Ohio if they file for bankruptcy?
A member’s bankruptcy filing may trigger provisions for automatic removal specified in the LLC’s operating agreement in Ohio.
How does removing a member affect the distributions and profits of an LLC in Ohio?
Removing a member can affect the distributions and profits of an LLC in Ohio, as the remaining members may take on a larger percentage of ownership or may need to buy out the departing member’s share.
Who receives the removed member’s capital contributions in an LLC in Ohio?
The remaining members of an LLC in Ohio typically receive the removed member’s capital contributions in proportion to their respective ownership percentages.
Can a removed member still be held liable for the actions of the LLC in Ohio?
Yes, a removed member can still be held liable for the actions of the LLC in Ohio if they committed wrongful or illegal acts while they were a member.
Are there any tax implications of removing a member from an LLC in Ohio?
There may be tax implications of removing a member from an LLC in Ohio, depending on the new ownership structure and the LLC’s tax classification.
What happens if a member is removed from an LLC and they have an outstanding loan in Ohio?
If a member of an LLC in Ohio has an outstanding loan, their repayment obligations generally remain intact after they are removed from the LLC.
Can a member be removed from an LLC if they violate the operating agreement in Ohio?
Yes, if a member violates the operating agreement of an LLC in Ohio, they may be removed by an action allowed in the operating agreement.
How important is the LLC operating agreement when removing a member in Ohio?
The LLC operating agreement is crucial when removing a member in Ohio, as it provides the framework for processes and governance that must be followed.
What happens if the operating agreement is silent on removing members in Ohio?
If the operating agreement is silent on removing members in Ohio, the default laws and statutes of Ohio apply to the situation.
Can an LLC in Ohio remove a member if the operating agreement is unclear or poorly written?
An LLC in Ohio may struggle to remove a member if the operating agreement is unclear or poorly written, as it may create legal complications and dispute.
Does the reason for removing a member of an LLC need to be explicitly stated in Ohio?
Yes, the reason for removing a member of an LLC in Ohio should be specifically stated in the operating agreement or other documentation to prevent contention or allegations of unfair treatment.
How do I remove a member from an LLC in Ohio?
Members can be removed in accordance with the LLC’s operating agreement or through a member vote under Ohio law.
Is a vote needed to remove a member from an Ohio LLC?
Yes, a vote is usually required unless the LLC’s operating agreement specifically allows for other removal methods.
Can a member be removed without cause in Ohio?
Typically, a member cannot be removed without cause as outlined in the operating agreement or under Ohio law.
How much of the vote is needed to remove a member from an Ohio LLC?
The amount of required votes to remove a member can vary depending on the LLC’s operating agreement.
What is the Uniform Limited Liability Company Act in Ohio?
The Uniform Limited Liability Company Act is Ohio’s LLC law and establishes guidelines for forming and governing LLCs in the state.
Do I need an attorney to remove a member from an Ohio LLC?
While an attorney is not required, consulting with one can help ensure that the LLC’s requirements and Ohio law are followed correctly.
Can a member force the dissolution of an Ohio LLC?
Under Ohio law, a member can file for the dissolution of an LLC, but this is a drastic measure that typically requires court approval.
Can a member of an Ohio LLC sell their interest to another person?
Under Ohio law, a member may sell their interest in the LLC, but the buyer must also meet the qualifications of the LLC’s operating agreement.
What is required to remove a member from an Ohio LLC who has filed for bankruptcy?
The removal of a member who has filed for bankruptcy may require court approval and adherence to bankruptcy law and the LLC’s operating agreement.
Can a member of an Ohio LLC be removed if they are no longer active in the company?
Yes, if defined in the LLC’s operational agreement or under Ohio law, a member can be removed for lack of participation.
How does the removal of a member affect the Ohio LLC’s tax structure?
Unless specified otherwise in the LLC’s operating agreement, the removal of a member should not significantly change the tax structure.
Can a member who is being removed still claim a share of the Ohio LLC’s profits?
No, once a member is removed, they are no longer entitled to a share of profits or decision making power in the LLC.
Can a member be removed from an Ohio LLC if they breach the operating agreement?
Yes, a member can be removed if they violate the terms of the operating agreement or Ohio law.
Is mediation an option for resolving ownership disputes within an Ohio LLC?
Yes, mediation or another form of alternative dispute resolution can be used to resolve disputes instead of resorting to removing members.
Can the Ohio Secretary of State facilitate the removal of a member from an LLC?
Ohio’s Secretary of State does not have the authority to remove members from LLCs.
Can an Ohio LLC buy out the percentage ownership of a member being removed?
Yes, an LLC can purchase the percentage ownership of a removed member, but this must be done in accordance with Ohio law and the LLC’s operating agreement.
In Ohio, can an LLC issue a non-compete clause for members being removed?
Yes, an LLC can include non-compete clauses as part of their operating agreement and enforce them legally in Ohio.
Can only one member of an Ohio LLC vote to remove a member?
Generally, decisions regarding member removal are made by a vote or agreement of the remaining members.
Can a member of an Ohio LLC be removed if they are being dishonest or acting against the best interest of the LLC?
A breach of duty or fraudulent activities by a member may constitute grounds for their removal according to Ohio law.
Can an Ohio LLC have multiple classes of members with different removal procedures?
Yes, an Ohio LLC may establish classes of members and outline varying procedures for member removal in its operating agreement.
Can the voted out member of an Ohio LLC reclaim their ownership stake?
No, a member who has been removed cannot reclaim their ownership stake once the decision is final.
In Ohio, can a member be removed due to investor disagreements on financial direction?
Generally, a member would not be removed due to disagreements on financial direction unless those disagreements constitute a breach of contract or Ohio law.
Does Ohio provide protections for minority members during the removal process?
Ohio law offers some protections for minority members during the removal process and in instances of oppression.
Can a member be removed from an Ohio LLC based on personal animosity towards another member or outside influence?
Personal animosity or influence alone is generally not grounds for the removal of a member in Ohio.
Are there fees associated with removing a member from an Ohio LLC?
There may be legal or filing fees associated with the removal process, which may vary depending on the operating agreement of the LLC.
Can an Ohio LLC operate without a unanimous vote of all members?
Yes, an Ohio LLC can operate without a unanimous vote of all members if stipulated in the operating agreement.
Can a member of an Ohio LLC be removed for failing to maintain professional ethical standards?
Ohio law provides grounds for the removal of members who engage in egregious misconduct, which extends to improper ethical behavior.
Is an Ohio LLC obligated to offer any compensation to a member being removed?
While not legally obligated, an Ohio LLC may offer compensation to departing members as part of their severance.

Also Read

Conclusion

Removing a member from an LLC in Ohio 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 Ohio law and continues to operate smoothly during this transition.

Leave a Comment