NEW YORK LIMITED LIABILITY COMPANY LAW CHAPTER 34 ARTICLE 4 SECTION 403: MEMBERSHIP ECONOMIC RIGHTS VS. MEMBERSHIP MANAGEMENT RIGHTS.

 

By John Kiritsis, Esq., CPA, MBA, MS, JD, LL.M

 

Kiritsis Law Group

 

212 922 0005

 

Section 403 of Chapter 34 Article 4 of the New York Limited Liability Company Law pertains to the right of members to dissociate from an LLC in New York. This section specifies the circumstances under which a member may dissociate from the LLC, such as by withdrawing, being expelled, or becoming bankrupt. The section covers the procedures for effecting a dissociation, including the notice requirements and the effect of dissociation on the member's economic rights and management rights. The section also covers the ability of the operating agreement to vary or eliminate the default rules under the law with respect to dissociation. Additionally, the section provides guidance on the effect of dissociation on the LLC and the remaining members, and the potential for the LLC to continue to exist after a member's dissociation.

 

LLCs are required to have an operating agreement, which is a document that sets out the rules and procedures for running the company.  The operating agreement can be very flexible and can be tailored to meet the specific needs of the company and its members.  LLCs are not required to hold regular meetings or keep minutes, although it is generally a good practice to do so.  LLCs can have one or more managers, who are responsible for the day-to-day operations of the company. The managers of an LLC can be members or non-members, and can be appointed or elected by the members. LLCs are required to file an annual report with the state, which typically includes information about the company's ownership and management. LLCs are not required to have a board of directors, although some larger LLCs may choose to have one.

 

Sources:

Universal Athletic Sales Co. v. American Gym Recreational Equipment Corp., 546 F.2d 530 (3d Cir. 1976) (USA)

 

Vernon v. Schuster, 179 A.D.2d 1088 (N.Y. App. Div. 1992) (USA)

 

Sea-Land Service, Inc. v. Pepper Source, 941 F.2d 519 (7th Cir. 1991) (USA)

 

Pereira v. United States, 347 U.S. 1 (1954) (USA)

 

St. Paul Fire & Marine Ins. Co. v. Pietrangelo, 677 F. Supp. 742 (D.N.J. 1988) (USA)

 

VTB Capital plc v. Nutritek International Corp., 2013 WL 788649 (2d Cir. Mar. 5, 2013) (USA)

 

Leasco Data Processing Equipment Corp. v. Maxwell, 468 F.2d 1326 (2d Cir. 1972) (USA)

 

In re Refco, Inc. Securities Litigation, 503 F. Supp. 2d 611 (S.D.N.Y. 2007) (USA)

 

Gertz v. Fitchburg Gas & Elec. Light Co., 23 N.E.2d 862 (Mass. 1939) (USA)

 

Fletcher v. Atex, Inc., 68 F.3d 1451 (2d Cir. 1995) (USA)

 

United States v. Jon-T Chemicals, Inc., 768 F.2d 686 (5th Cir. 1985) (USA)

 

New York Business Corporation Law

 

New York Limited Liability Company

 

New York General Obligations Law

 

NYS Office of Professions

 

U.S. Constitution

 

New York Business Corporation Law

 

New York Limited Liability Company

 

New York General Obligations Law

 

NYS Office of Professions

 

U.S. Constitution

 

 

 

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