Member withdrawal process
- Review operating agreement for withdrawal provisions
- Determine buyout value (operating agreement formula, fair market value, or book value)
- Negotiate buyout terms (lump sum, installments, conditions)
- Draft buyout agreement and operating agreement amendment
- Sign by withdrawing member and remaining members
- Pay buyout per agreed terms
- Update capital accounts in bookkeeping
- Update bank account signatories
- File Form 8822-B with IRS if responsible party changes
- Update operating agreement to reflect remaining members
What if there is no operating agreement provision
Wyoming Statute 17-29-602 and related provisions provide default rules where the operating agreement is silent. Generally, a withdrawing member is entitled to the fair market value of their interest at withdrawal. The remaining LLC continues. Without agreement, disputes about valuation are common; an operating agreement with clear withdrawal procedures prevents this.
Multi-member to single-member implications
- If withdrawal leaves only one member, LLC tax treatment changes from partnership to disregarded entity
- File Form 8832 if needed to confirm classification change
- Final Form 1065 + K-1s for partnership period
- Begin filing Form 5472 + pro forma 1120 for single-member period