Hi. Lee Phillips again.
I want to talk about how to get somebody out of a corporation or an LLC.
You may be business partners with somebody
now you're not partners, you're LLC members together
but your partners, okay?
And you want to go your separate ways
you want to continue the LLC,
the other guy doesn't want to continue the LLC, he wants out.
That's fine get him out.
How do you get him out?
That's the question.
Well, you may have to buy him out
and I'm not going to go into the economics of it
that's for you to figure out.
But legally what you're going to do
is you're going to put them in an entry
and now here again
you've got to look at your operating agreement
or your bylaws if it's a corporation bylaws
operating agreement LLC
They may have something in written in there
that says how you get rid of a member
or if the guy wants to sell his stock
basically selling his stock or his membership interests
you may be buying it
the company may be buying it back
it may go back into the treasury
But we're getting rid of this guy
and the bylaws/operating agreement may say
that everybody has the first right of refusal
if there's four of you in the LLC or the corporation
Joe down here he may want to buy that guy's piece
so that he has a bigger control
so look at the operating agreement, the bylaws
assuming that everything's cool
doesn't say anything about it or whatever
you're going to have the guy sign the back of his membership certificate
or his stock certificate
You didn't ever issue a stock certificate or a membership certificate, did you?
Well, okay. Let's make a minute entry
in the books.
You remember you're supposed to have meetings, take minutes, that sort of stuff?
That's another YouTube.
But we make a minute entry that says Joe is returning his
stock membership interest to the company
and at that point
if there is a certificate
or stock certificate, membership certificate
you're gonna have him sign the back
transfer it to the company
or transfer it to you, whatever you want
and you're gonna cross out certificate number one
or certificate number two
whatever that one is
and say transferred to company
or transferred to you
or whatever
and that takes it off of the books.
Now what you pay the guy is another issue.
The guy may have put money into it
he didn't get anything out, he just wants out.
Fine, he now has a tax loss
because he gave his stock certificate back, got zero for it.
So the economics of it are another issue.
But the how to get rid of him
from a legal standpoint, from the company standpoint, is pretty easy.
Make the minute entry
have him sign the certificate
cut off the certificate on the stock books.
Now, you may have to adjust the membership role
or the owners role
on the state books. Some states require
that you list the members in the LLC
Fine.
You can make an amendment at that point
to those state records
just go to the state website,
unless you're in California, they don't have a state website
and get the amendment papers
and take his name off of that list.
Or if it's close to the annual,
then you wait for the state
some states do, some states don't
you wait for the state to send out the request for the update of the information
and you send it into the state with your check for that year
and pay him off.
So, get his name off
and if you're the one leaving
you want your name off
because you don't want to be liable for anything on those state records
you want out
so make sure that your name is off
call up the state a month later
and say, "Hey, is Joe Blow (me) a member of this LLC?"
if you if you're recorded at the state records
if you're recorded,
you've got a problem because you haven't been out yet
you're still on the records
and you don't want to be on the records.
So check the records, too, if you're the one leaving.
That's pretty much about it.
As far as the legal aspects
of taking a person off the roll
as a stockholder in
a small company or an LLC