{"id":1376,"date":"2010-11-07T13:48:54","date_gmt":"2010-11-07T20:48:54","guid":{"rendered":"http:\/\/www.keytlaw.com\/azllclaw\/?page_id=1376"},"modified":"2021-01-01T15:03:37","modified_gmt":"2021-01-01T22:03:37","slug":"adding-or-removing-a-member","status":"publish","type":"page","link":"https:\/\/www.keytlaw.com\/azllclaw\/changing-members\/adding-or-removing-a-member\/","title":{"rendered":"Adding or Removing a Member of an Arizona LLC"},"content":{"rendered":"

What to Do When Your LLC Adds or Deletes a Member or if a Member’s Interest in the Company Changes<\/strong><\/p>\n

By Richard Keyt<\/a>, Arizona limited liability company & business attorney<\/p>\n

If your Arizona limited liability company has added or removed a member or changed the percentage ownership of existing members, the transaction(s) should be documented in writing. Your Arizona LLC is a legally existing entity and its members have legal rights that can be enforced by Arizona courts. Any time your LLC adds a new member or a member ceases to be a member, the company must document the change to protect the interested parties. When your company has a change with respect to any member, do not rely on mere oral statements.<\/p>\n

Without a written document that shows a change in ownership of your LLC, how will the members prove who the owners are, their percentage of ownership and the dates of acquiring membership interests? If the company adds a new member, a member ceases to be a member, any members change their percentage ownership of the company or there is a change with respect to any other rights or obligations of a member, the change should be documented by having the parties sign appropriate documents.<\/p>\n

A member who says “I quit and don’t want to be a member anymore” when your company is going through hard times may come back to reclaim ownership months or years later when the company’s fortunes have improved. You may have a hard time convincing a court that your “former” member terminated his membership when the only written evidence of membership is the company’s Articles of Organization on file with the Arizona Corporation Commission that names the “former” member as a member of the company.<\/p>\n

Arizona Revised Statutes Section 29-3202.B<\/a> requires that the company file an amendment to its Articles of Organization with the Arizona Corporation Commission\u00a0within thirty days after the occurrence of any of the following:<\/p>\n

1. a member-managed limited liability company has a change in members.<\/p>\n

2. a manager-managed limited liability company has a change in managers or a change in members owning twenty percent or greater interest in the capital or profits of the company.<\/p>\n

The Arizona Limited Liability Company Act Section 29-3401.C<\/a> provides that after a limited liability company files its initial Articles of Organization, “After formation of a limited liability company, a person becomes a member . . . as provided in the operating agreement . . . [or] by agreeing to become a member, with the affirmative vote or consent of all the members<\/strong><\/span>.”<\/p>\n

If your Operating Agreement does not provide that a new member can be approved by less than unanimous consent, a new member cannot be admitted as a member of the company without the consent of all members. An Arizona LLC should always document in writing those members who approve or disapprove of admitting a new member.<\/p>\n

Has your Arizona LLC properly documented all changes involving members and their percentage of ownership of the company?\u00a0 If you are considering becoming the member of an Arizona LLC or if you are creating a new Arizona LLC you must read and understand “Requirements of Arizona Law to Become a Member\/Owner of an AZ LLC<\/a>.”\u00a0 If your LLC does not properly document the addition or removal of members, it is a recipe for future disagreements and litigation.<\/p>\n

If a change in membership is not properly documented or if it does not comply with Arizona’s statutory LLC law, the company and its members risk having a dispute one day over who the owners are, how much does each member own and when did the member acquire the interest. These types of disputes frequently result in litigation and can be very expensive to resolve. Do not delay properly documenting changes involving members. The best time to document a change is when it occurs. To hire us to document the addition or removal of a member of an Arizona LLC complete our online Member Change Questionnaire<\/a>. Order your change of member documents now before it is too late.<\/p>\n

Documents Needed to Evidence a Change with Respect to a Member<\/strong><\/p>\n

Normally, whenever there is a change with respect to any member of an Arizona LLC, the change should be evidenced, at a minimum, by all of the following documents:<\/p>\n