Commercial Division Blog

Posted: March 27, 2014 / Categories Commercial, Business Divorce

LLC Member Not Permitted to Withdraw From LLC

On March 12, 2014, Justice Kitzes of the Queens County Commercial Division issued a decision in In the Matter of Kassab, Index No. 14428/2013, ruling on two pending motions in a special proceeding involving claims for judicial dissolution of two closely-held entities and related relief.

This post focuses on the resolution of the respondent's motion to dismiss the petitioner's third cause of action to withdraw as a member of an LLC.

Section 606(a) of the LLC Law provides that member of an LLC may only withdraw if the right of withdrawal is provided for in the operating agreement "unless an operating agreement provides otherwise, a member may not withdraw from a limited liability company prior to the dissolution and winding up of the limited liability company."

In Kassab, Justice Kitzes dismissed the petitioner's claim to withdraw, writing:

Thus, under the statute, a member may withdraw from a limited liability company only as provided in its operating agreement. If the operating agreement is silent, a member may not withdraw prior to the dissolution of the company. Here, [the LLC]'s operating agreement provides, in pertinent part, that "a Member of the Company may withdraw from the Company in accordance with the Limited Liability Company Law." Therefore, as there has been no dissolution of [the LLC], and as petitioner does not allege the existence of some other agreement or consent, the third cause of action fails to state a claim for withdrawal under the provisions of Limited Liability Company Law § 606. That branch of respondent's motion which seeks to dismiss the third cause of action, is granted.

(Internal citations omitted.)

NOTE: Schlam Stone & Dolan LLP represents the petitioner in this action.