Articles Tagged with expel member

  • There are circumstances in which a member of a limited liability company in most states may be expelled as a member from the company.  This is known as involuntary dissociation.

  • An action may be brought by the LLC seeking a court order of involuntary dissociation on the basis that the member has engaged in wrongful conduct that has or will harm the company, has repeatedly breached the operating agreement, or because it is not ‘reasonably practicable’ for the company to continue with him or her as a member.

  • Dissociated members lose their rights to participate in management, but retain their financial interest and a right to receive distributions. 

  • In litigation over an involuntary dissociation, a court may order a sale of the interests of a member to the LLC or to any other party to the litigation.


    Limited Liability Company AttorneysProbably the most litigated issue in my practice involves the expulsion of a member of a limited liability company in response to some wrongful conduct or breach of the operating agreement. We represent majority owners when they are trying to remove a member and we represent the minority member who is fighting removal. Not all states permit removal or expulsion – known as involuntary dissociation – for misconduct and some recent decisions indicate that in the states that do, it may be harder than once thought.

Involuntary Dissocation of a Limited Liability Company Member

There was a belief, perhaps unreasonably so, that Courts were unwilling to keep people in business together when plainly the owners were no longer capable of maintaining a working relationship. The New Jersey Supreme Court, in the first decision by any state supreme court on the topic, held that the concept of “not reasonably practicable” to stay in business together means more than a personality conflict. It requires a structural inability to act, such as ongoing deadlock or significant wrongful conduct. Continue reading

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LLC Divorce: Till Death Do Us Part, or Just Irreconcilable Differences

Just Divorced

Should a business divorce be hard or easy?  In the world of human divorces, it’s the difference between no-fault divorce and divorce only after a showing of cause.  In the world of businesses, it turns on the
concept of court-ordered purchases and sales of minority interests.  And in the area of law governing limited liability companies, it is the concept of “involuntary dissociation” – expulsion, if you will, of one of the members.

Involuntary Dissolution of LLC

Two recent cases in the past month demonstrate this concept.  East of the Hudson River, we have the First Department of the Appellate Division in New York opinion in Barone v. Sowers, , 2015 NY slip OP 04195 (1st Dept May 14, 2015), in which the court held that allegations of oppressive conduct simply don’t make out a claim for relief under New York’s limited liability statute.

Compare this Empire State decision with one from the Garden State captioned IE Test, LLC v. Carroll, docket No. A-6159 (N.J. Super. App. Div., March 17, 2015)(Opinion Below).  Here, the appellate court affirmed the expulsion of a member because it was clear that the parties personal animus prevented them from maintaining a working relationship.

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