Membership in the LLC
LLCs in Indiana must have one or more members, and each member must be a natural person or a recognized business entity. A member can acquire an interest in the LLC when it is formed, or in a manner laid out in the operating agreement. Becoming a member usually requires a contribution of cash or property to the LLC (or taking on an obligation to do so), or it may take the form of services rendered to the LLC. If the operating agreement does not provide a procedure for becoming a member, however, a new member may acquire an interest in the LLC upon the written consent of all the members.
An LLC member can only resign as permitted in the articles of organization or operating agreement. In Indiana, there are significant differences in how members are allowed to withdraw or resign between LLCs formed on or before June 30, 1999, and those formed after that date.
For LLCs formed on or before June 30, 1999, a member may withdraw after giving 30 days’ written notice (or the amount of notice specified in the operating agreement) to the members, unless a written operating agreement provides that a member does not have the power to voluntarily withdraw from the LLC.
If the withdrawal violates the operating agreement, or the withdrawal occurs as a result of the member’s wrongful conduct, the LLC may recover damages for breach of the operating agreement, including the reasonable cost of replacing services that the withdrawn member was supposed to perform. The LLC may subtract the damages from any amount that would otherwise be distributed to the withdrawn member, in addition to pursuing any remedies provided for in the operating agreement or available under applicable law.
If the LLC has been formed for a specific time period or for a particular project or undertaking, a member’s withdrawal before the expiration of the term is a breach of the operating agreement, unless otherwise stated in a written operating agreement.
For companies formed after June 30, 1999, members may not withdraw from the LLC before its dissolution and the winding up of the LLC’s affairs, unless the operating agreement specifies otherwise. In fact, for these later LLCs, a member is allowed to withdraw from the LLC only at the time or upon the occurrence of events specified in the operating agreement, and in a manner in accordance with the operating agreement.
A specific membership vote to continue the LLC after the dissociation of a member is not required.
Unless specified otherwise in the LLC’s articles or operating agreement, managers are elected, removed, and replaced by a majority in interest of members, and serve for an indefinite term. A “majority in interest” means members who have contributed more than half of the LLC’s current capital.