Question: I am named in the original Articles of Organization of an Arizona limited liability company as a member. Another member of the LLC signed an amendment to the Articles of Organization that removed me as a member. Is that legal and does it terminate my membership in the LLC?
Answer: No and no unless the member who signed the amendment had a contractual right to sign and file the amendment that removes you as a member of the LLC. Arizona LLC law does not give a member of an Arizona LLC the right or power to unilaterally terminate the membership interest of another member.
As an Arizona limited liability company attorney who formed my first AZ LLC in October of 1992 and who has formed 7,800+ LLCs since then I must say that this is a very common scenario. People think that the mere fact they file an amendment to the Articles of Organization that removes a member that the filed document has legal significance, i.e., that the person or entity that was a member yesterday is suddenly no longer a member today merely because the Articles were amended.
When a person or an entity acquires a membership interest in an Arizona LLC that person or owner has a property right recognized by Arizona law. The owner of a property right cannot be divested of the property merely because somebody files a false document. Example: Homer Simpson owns a parcel of Arizona land. Ned Flanders signs a deed that says Homer Simpson conveys the land to Ned and then records the deed. This false deed does not transfer title to the property to Ned. Ned’s deed is a legal nullity because it was not signed by the owner of the property.
The same concept applies to the property right that attaches to the member of an Arizona LLC. If Ned Flanders signs and files an amendment to the Articles of Organization that removes Homer Simpson as a member that document does not cause Homer to cease to be a member. There are four ways that Homer can cease to be a member of the company:
- Homer dies.
- Homer signs a document by which he assigns his membership interest to the LLC or one or more other people or entities.
- Somebody has a legal or contractual right to terminate Homer’s membership interest.
- A court terminates the membership.
Warning: Arizona Revised Statutes Section 29-613.A states: “A person who . . . signs any articles, statement, report, application or other document filed with the commission that is known to the person as false in any material respect is guilty of a class 4 felony.”