Over the past decade, the Limited Liability Company (“LLC”) has become one of the most favored forms of a closely held business organization in New York. As an unincorporated business entity, the LLC is favored because of its pass-through tax treatment coupled with maximum operating flexibility. However, an LLC also demands a well-written and comprehensive operation agreement - especially with regard to withdrawal and dissolution - because it may create the only chance for a member to exit the company.
Under Limited Liability Company Law (“LLCL”) §606, for example, unless the operating agreement specifically provides for the right of withdrawal, a member is not allowed to withdraw prior to dissolution of the LLC. Thus, where there is no such provision, if a member wants to withdraw, he must try to force a dissolution under LLCL §702, which provides: