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


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Remove Member From Oklahoma LLC

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

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Reasons for Member Removal in Oklahoma LLC

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

  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 Oklahoma Business Attorney should be sought when considering this action.

How to Remove a Member from Oklahoma 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 Oklahoma 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 Oklahoma Operating Agreement

The first step in removing a member from an LLC in Oklahoma is carefully reviewing the Oklahoma Operating Agreement for your LLC. The operating agreement is the document that outlines how the Oklahoma 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 Oklahoma 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 Oklahoma LLC, consulting with a Business Attorney in Oklahoma before taking any action is advisable. A business attorney experienced in Oklahoma 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 Oklahoma:

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

Step 5: Update the Operating Agreement

After removing a member, Oklahoma 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 Oklahoma 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 Oklahoma LLC naming requirements. In Oklahoma, 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 60 days. You must file a name reservation application with the Oklahoma Secretary of State to keep the name. The online name reservation fee costs $25, while the mail name reservation fee costs $25.
  • 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 Oklahoma. 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 Oklahoma 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 Oklahoma Secretary of State

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

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

Step 7: Update Tax and Financial Records

Finally, updating the Oklahoma 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 Oklahoma Tax Commission 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 Oklahoma.

Is It Important to Update the Operating Agreement?

It is important to update the operating agreement when you remove a member from your Oklahoma 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 do I remove a member from my Oklahoma LLC?
The process to remove a member from an LLC in Oklahoma can vary depending on the circumstances. Generally, it involves amending the operating agreement and notifying the state of the change.
What are valid reasons for removing a member from an Oklahoma LLC?
Valid reasons for removing a member from an Oklahoma LLC could include a breach of the operating agreement, illegal activities, conflicts of interest, or if they are no longer contributing to the company.
Can a membership interest be transferred without the expressed written consent of other members in an Oklahoma LLC?
It depends on what your operating agreement says. In Oklahoma, LLCs are generally governed by their operating agreements, so the transfer of interest must comply with those rules.
If I am the sole member of an Oklahoma LLC, can I remove myself?
Yes, you can remove yourself by amending the operating agreement and canceling the LLC with the Oklahoma Secretary of State.
Does Oklahoma have any special requirements for LLC member removal?
Not specifically, but you should consult an attorney to ensure all legal requirements are met.
Can a member who is removed from an Oklahoma LLC file a lawsuit for wrongful termination?
Possibly, depending on the reasons for the removal. The ousted member could file a wrongful termination lawsuit if they can prove that they were removed unlawfully or illegally.
Can an Oklahoma LLC member be forced out involuntarily?
Depending on the circumstances, an Oklahoma LLC member can be forced out involuntarily if they breach the operating agreement or engage in illegal activities.
How do I terminate an Oklahoma LLC without causing issues with my other members?
Again, the process depends on what your operating agreement says. In general, you will need to obtain the consent of a majority of the members.
Are there any Oklahoma laws that protect minority LLC members from being forced out?
Yes, Article III of the Oklahoma Uniform Limited Liability Company Act (2007) protects minority members and allows them to challenge or block a member’s removal.
Can a member have their ownership percentage in an Oklahoma LLC reduced?
Yes, members’ ownership percentage in an Oklahoma LLC can be reduced if they agree to it in advance and some of their ownership is bought out by other members.
What happens to a member’s interest in an Oklahoma LLC if they are removed?
The removed member’s membership interest in an Oklahoma LLC would be subject to the operating agreement’s terms. That includes any provisions regarding how the interest is valued and/or disbursed.
Can payments owed to a member in an Oklahoma LLC be withheld after they are removed?
If payments are owed to the removed member according to the operating agreement or accompanying documents, these payments generally need to be made. Otherwise, withholding them would be considered illegal.
How does the disbursement of assets work when a member is removed from an Oklahoma LLC?
Asset distribution in an Oklahoma LLC should be in line with the documented operating agreement. The ousted member must be paid the share of money they are entitled to.
Can a membership interest be sold or given to someone outside the LLC in Oklahoma?
Yes, in Oklahoma, members are usually permitted to sell or transfer their interest as they wish as per what the Operating Agreement says.
What is the fee for amending the articles of incorporation on an Oklahoma LLC?
According to the Oklahoma Secretary of State’s website, there Nonstandard Filings for Amendments typically cost between $25 and $200.
Can you force a buyout on a member of an Oklahoma LLC for good cause?
Yes, if you can prove a lawful or reasonable rationale and there’s an agreement between the parties any OK LLC member can be subject to an intent to purchase their piece of business.
How long does it take to remove a member from an Oklahoma LLC?
The process varies depending on the reason for removal and the applicable procedures outlined on your Operating agreement. Nonetheless, business changes on formal paper works take a speedy process.
What happens if there is no operating agreement and a member must be removed from an Oklahoma LLC?
If there’s no Operating Agreement written down, Oklahoma LLC devotes its business structure and rules from their Uniform Limited Liability Company Act and into which the future planning should go accordingly.
How does a member being removed from an Oklahoma LLC affect the company tax status?
There may not necessarily be any changes to the Oklahoma LLC’s tax status if the removed member agrees to sell his remaining interest in the company.
Does an ousted member have the right to obtain specific documentation or record data regarding the Oklahoma LLC?
Yes, if they’re still engaging business with the corporation until the point of removal issued to an Oklahoma member within his 10-day written request upon existing documentation records.
How does the removal of a member affect the controller Agreement (Attachment D)?
In most cases, the removal of an Oklahoma LLC member would not dramatically affect Attachment D (controller Agreement). Once a member is gone, the funds pooled be their investment would skip left the percentages defined in this agreement.
Can an Oklahoma LLC have both corporate and individual members and can part of the structure leverage Oklahoma Companies Act statutes?
Yes, it can have as many corporate members or single members that it could thank due to Oklahoma LLC Act you can choose a combination from. You have the privilege to remove the regulations usually mandatory in standard LLCs.
How should any limited liability capable of removal affect the nature and prospective demand of the sale of the certificate of interest?
If there is any desired intent remaining not lost in relation to the ownership share exchanging, any disputed vendee may require the lowering of the purchase cost when the removed member authorizes this transfer.
Will the liability for a removed member charge ongoing complicated transactions or proprietary interests within the ambit control agreement (Attachment D)?
This is dependent on all confinements or inductions as documented in the Oklahoma state relating to transaction deadlines or having a propu collector and presiding authority to keep a hold on executed responsibilities.
Are there any restraints subject to initial distributions by an Oklahoma LLC?
There are no restraints related to initial dividend distributions, which ought to be available to all members per proportional representation and utility demand functionality metrics featuring in capital share.
How does the Oklahoma Uniform Limited Liability Company Act Edition 2015 impact membership cancellation rights?
Membership loans and relative handling when a member has reached credit limit leads to modification of Minority along with Majority interests and power were subtracted while revising the clauses around Division rights.
Under what circumstances must an acting minimum profit share return calculation be released in confederacy with a member termination?
Requiring minimum profit share shouldn’t stop if LLC still be profitable when a member has been removed. CFO documentation should feature share prices information per removed clients/users provided with the analysis.
Can the options list under Attachment C restrain pricing configurations if there’s a mandate to compensate for prejudice after membership reduction evolvement?
Attachent C mitigates the chaos mainly because there isn’t any stabilization fixed on prices when nobody is holding control. Any changes which happen before change of ownership at that point doesn’t ration future earnings potential.
How do I remove a member from an LLC in Oklahoma?
According to Oklahoma statutes, an LLC’s operating agreement will typically define the process for removing a member.
What if the operating agreement doesn’t outline the removal process?
If the operating agreement is not clear, a majority vote by members may be required to remove a member.
Can a member be removed without cause?
Yes, a member can be removed without cause in Oklahoma.
Do all members need to agree to remove a member?
No, in most cases, a majority vote by members will suffice to remove a member.
Does a written notice need to be provided to the member being removed?
Yes, written notice should be provided to the member being removed before the vote takes place.
How much notice is required in Oklahoma?
At least 10 days’ notice is required in Oklahoma.
What if a member refuses to sign off on their removal?
If the member to be removed refuses to sign off on their removal, legal action may be necessary.
Can I remove a member from an LLC if they are a minority owner?
Yes, a member can be removed even if they are a minority owner.
Can the LLC purchase a member’s share to remove them?
Yes, the LLC can sometimes purchase the member’s share to remove them.
How is the value of the member’s share determined?
The value of the member’s share is usually determined by the LLC’s operating agreement, but an appraiser may be hired to make a valuation as well.
Is the member entitled to receive fair market value?
Yes, the member is usually entitled to receive fair market value for their share.
What if a member is being removed for unlawful conduct?
In this case, the member may not be entitled to any compensation for their share.
Can a member be removed for breach of fiduciary duty?
Yes, a member can be removed for breach of fiduciary duty.
What is the process for removing a member for breach of fiduciary duty?
An established process for the removal of a member for breach of fiduciary duty should be included in the operating agreement.
Who should initiate the removal for breach of fiduciary duty?
Another member, or group of members, or another stakeholder should initiate the removal for breach of fiduciary duty.
Can a member who is removed for misconduct become an employee of the LLC?
It may not be wise to hire a member who was removed for misconduct as an employee of the LLC.
Will there be tax consequences to a member’s removal?
Yes, there may be tax consequences to a member’s removal.
Is it possible to remove a member and incorporate a new member at the same time?
Yes, it is possible to remove a member and incorporate a new member at the same time.
Does the operating agreement need to be amended after removing a member?
Yes, the operating agreement may need to be amended after removing a member.
Will amending the operating agreement trigger fees or taxes?
There may be fees and taxes associated with amending the operating agreement of an LLC.
What is the registered agent’s role in the member removal process?
The registered agent does not usually play a role in the member removal process, but they should be notified of any changes to the LLC’s membership.
Can the removed member sue to maintain their membership?
It is possible for the removed member to sue to maintain their membership, but they must have a valid legal reason to do so.
Can a member be removed if they file for bankruptcy?
In some cases, bankruptcy may trigger a member’s removal from an LLC.
Can a member be removed for unwanted behavior or action?
Yes, a member can be removed for unwanted behavior or action, subject to the operating agreement.
Who can initiate the process of removal?
Another member, or group of members, or another stakeholder should initiate the process of removal.
Can a member be removed without a vote?
In most cases, a majority vote by members will be necessary to remove a member.
Can removal be initiated against the LLC manager?
Yes, removal of an LLC manager can be initiated in certain circumstances.
What is the role of an attorney in this process?
An attorney can provide substantive guidance through the process if a dispute arises.

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Conclusion

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

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