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Dear Bonnie, Some but not all states have a prescribed form on which to
report a "disassociation" of a member. In the case of Arizona, there is no
such form. A member may resign by simply delivering a written notice of
withdrawal (resignation) to the other members of the LLC at their last known
addresses.
(article continued below ...)
As far as your tax filing for the year goes, you will file a final
partnership tax return for the period ending as of the date of your mother's
withdrawal from the LLC. (Your mother will be responsible for the tax on her
share of the net taxable income from the LLC up to that point.) Because your
LLC will be left with just one member, it will be a disregarded entity for
tax purposes and taxed as a sole proprietorship thereafter. Therefore, you
will also need to attach a Schedule C to your 1040 individual tax return
covering the period in which your LLC is a single-member LLC. Sole
proprietors use IRS Form Schedule C (1040) to report the profit or loss from
business.
I would like to take this opportunity to remind folks of the importance
of adopting an operating agreement for a multi-member LLC. The resignation
of the member in this case appears to be fairly simple. However, many
partnerships end for a number of reasons and not always on a good note, so
it is important to have an operating agreement that addresses the how's and
why's of a member's withdrawal and what happens to the member's interest in
the event of withdrawal. This is for the protection of each partner as well
as the LLC itself.
In most states, if a member's withdrawal violates the terms of an
operating agreement, an LLC may recover damages from the withdrawing
member--but an operating agreement would have to exist in order for there to
be a violation with recoverable damages in the first place. Aside from that,
it is good to come to an agreement ahead of time--in writing--so that if an
event such as a member's resignation, withdrawal, death, bankruptcy or
divorce occurs, the terms of separation and/or the disposition of the
member's interest in the LLC will be clear.
Chrissie Mould
About the PowerHomeBiz.com Guide:
 Chrissie
Mould Chrissie Mould has over a decade of experience in business
administration and startup business consulting. She has helped launch
companies in multiple industries and has managed corporate administration
and governance for public and private companies. She is an incorporation
specialist with MyNewVenture.com LLC. The company provides low-cost
incorporation services to entrepreneurs and small businesses. Visit
www.MyNewVenture.com to form
a corporation or LLC.
The opinions expressed in this column are those of the
author, not of PowerHomeBiz.com. Users should not treat the Guide's response as
legal, accounting, or professional advice as all answers are intended to be
general in nature. Such advice can only be properly given by qualified
professionals who are fully aware of a user's specific geographical areas or
circumstances, such as an attorney or accountant.
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