LLC Member Dissociation, Withdrawal, and Expulsion Requirements in Indiana
At a glance
| Governing law, member status exit, and scope | Indiana Business Flexibility Act, IC art. 23-18; ordinary domestic LLC membership cessation under §§ 23-18-6-5 to -6.1 with pre/post-6/30/1999 branches, plus fair-value §§ 23-18-5-5 to -5.1. Member, manager, assignee, and economic 'interest' remain distinct (§§ 23-18-1-10, -15; 23-18-4-1; 23-18-6) |
|---|---|
| Operating agreement, articles, and status-exit limits | Written agreement may remove older-LLC withdrawal power, authorize later-LLC exit, vary assignment/removal/death/entity events, add insolvency/bankruptcy/incompetency events, and change payout/records. Agreement may define management/assignment/admission; many status variations specifically require writing (§§ 23-18-4-5, -8; 23-18-5-5 to -5.1; 23-18-6-3 to -6.1) |
| Voluntary withdrawal: power, right, notice, and effective date | On/before 6/30/1999 LLC: unless written agreement removes power, withdraw anytime on 30 days' written notice to other members or agreement notice; early term/undertaking exit breaches by default. After 6/30/1999 LLC: no pre-winding-up withdrawal unless agreement specifies time/event and member follows it (§§ 23-18-6-6 to -6.1) |
| Wrongful dissociation, damages, and other liability | Older branch: agreement-breaching or otherwise wrongful withdrawal lets LLC recover breach damages, including reasonable replacement-service cost, and offset against amounts otherwise distributable; term/undertaking early withdrawal is breach. Later branch states no general wrongful-dissociation damages formula; agreement/other law controls (§§ 23-18-6-6(b)-(c), -6.1) |
| Agreement-based and unanimous-consent expulsion | Agreement-based removal causes cessation. After entire-interest assignment, majority in interest—not unanimity—may remove unless written agreement changes it; full assignment also ends membership automatically for later LLCs and for older LLCs when assignee becomes member. No default general no-cause expulsion route (§§ 23-18-6-4(h), -4.1(h), -5(a)(2)-(3)) |
| Judicial expulsion: applicant, procedure, and grounds | Chapter 23-18-6 states no ordinary judicial member-expulsion applicant or conduct/breach/continuation grounds. A member may seek entity dissolution when business cannot reasonably practicably continue in conformity with articles/agreement; that company remedy is not expulsion (§ 23-18-9-2) |
| Death, incapacity, insolvency, entity, and transaction events | Unless written agreement or all-other-member written consent changes it: individual death; trust termination excluding trustee substitution; dissolved/winding-up partnership, LP, or LLC; corporate dissolution; and estate full distribution end status. Written agreement may add insolvency, bankruptcy, incompetency. Sole-member death may automatically admit heir/legatee under 2024 route. No separate merger/conversion/domestication event (§§ 23-18-6-4 to -5) |
| Management, voting, authority, and post-exit duties | Cessation ends membership and member powers; unadmitted assignee has economics only. Manager need not be member, so member exit is not stated to end separately held manager office. Act states no general former-member future-duty cutoff; management/agency and winding-up authority remain separate (§§ 23-18-4-1, 23-18-6-3 to -5, 23-18-9-3 to -5) |
| Transferable interest, distributions, buyout, and economics | After dissociation, both formation branches entitle member to agreement/Act distributions plus, unless agreement changes it, fair value within reasonable time as of dissociation based on distribution share, less other distribution. Assignment transfers distributions only before admission. No fixed valuation procedure or payment security in §§ 23-18-5-5 to -5.1 |
| Prior liability, information, records, filings, and dissolution | Full assignment does not release unpaid-contribution/wrongful-distribution liability; death/disability do not excuse enforceable contribution. Statutory inspection belongs to current member/legal representative, not general former member; no prompt public cessation filing. Older dissociation may dissolve unless timely continued; later sole-member death has successor/90-day routes, while other member exits are not dissolution events (§§ 23-18-4-8; 23-18-5-1, -7; 23-18-6-4 to -5; 23-18-9-1 to -1.1) |
Requirements one by one
Formation date chooses the withdrawal rule
For an LLC existing on or before June 30, 1999, Ind. Code §§ 23-18-6-6 to -6.1 ordinarily gives a member power to withdraw at any time on 30 days' written notice to the other members or the notice required by the operating agreement. A written agreement may remove that power.
For an LLC formed after June 30, 1999, § 23-18-6-6.1 reverses the default. A member may not withdraw before dissolution and winding up and may leave only at the time or event specified in, and according to, the operating agreement. The two formation branches must not be blended.
Older-LLC wrongful withdrawal creates damages and an offset
When an older-LLC member has withdrawal power but the exit breaches the agreement or follows other wrongful conduct, the LLC may recover breach damages, including reasonable cost to replace services the member was obligated to perform. It may offset those damages against amounts otherwise distributable, in addition to agreement and other-law remedies.
An older definite-term or particular-undertaking LLC also treats pre-expiration withdrawal as agreement breach by default. The newer withdrawal section states no parallel statutory “wrongful dissociation” damages formula; agreement and other law govern an unauthorized attempt.
Agreement removal and full-assignment removal are separate
Under Ind. Code § 23-18-6-5(a)(3), removal according to the operating agreement ends membership. After a member assigns the entire interest, a majority in interest of the members may separately remove the assignor unless a written agreement provides otherwise. This is not a general no-cause removal power and is not measured by unanimity.
Assignment also has formation-date consequences. For a newer LLC, full assignment ends membership by default under § 23-18-6-4.1(h). For an older LLC, the assignor ceases when the assignee becomes a member under § 23-18-6-4(h). Chapter 6 states no ordinary judicial member-expulsion route; judicial dissolution under § 23-18-9-2 is an entity remedy.
Death and entity events are defaults the members can override
Unless a written agreement or written consent of all other members provides otherwise, § 23-18-6-5 ends membership on an individual's death, a member trust's termination except trustee substitution, dissolution/winding up of a partnership, limited partnership, or LLC, corporate dissolution, and full distribution of an estate's interest. A written agreement may add insolvency, bankruptcy, and adjudicated incompetency.
Sole-member death has a special 2024 route. When the interest is not beneficiary- registered and no written agreement controls, the interest passes to the probated-will legatee or intestate heirs, who are automatically admitted under § 23-18-6-4 or -4.1. A personal representative may exercise the deceased member's rights before distribution.
Dissociation ordinarily produces fair value
Under Ind. Code §§ 23-18-5-5 to -5.1, a dissociating member receives any distribution due under the Act or agreement and, unless the agreement provides otherwise, fair value within a reasonable time. Value is measured on the dissociation date by the member's distribution-sharing right, less the other distribution.
The sections do not supply a full appraisal process, fixed interest rate, security, or court filing window. This survey does not calculate value or decide the effect of a particular payout clause.
Status, manager office, records, and liability remain separate
Cessation ends member status and member powers; an unadmitted assignee receives distributions rather than management. But § 23-18-4-1(b) permits a nonmember manager, so membership exit does not itself state that a separately held manager office ends. The Act gives no broad former-member future-duty cutoff.
§ 23-18-4-8 grants inspection to a current member and information to a member or deceased/disabled member's legal representative; it states no general former-member inspection route. Chapter 6 creates no prompt public cessation filing. Full assignment does not release unpaid-contribution or wrongful- distribution liability, and an enforceable contribution promise can survive death or disability.
Dissolution treatment also follows the formation branch
For an older LLC, a dissociation event can trigger dissolution unless all remaining members continue within 90 days or the articles/agreement provide another rule. For a newer LLC, ordinary dissociation is not listed as a dissolution event, but sole-member death can dissolve the company if no member remains unless the automatic successor-member route or an agreement-based 90-day continuation/admission route applies.
What trips people up
- June 30, 1999 is the dividing line. Older LLCs default to 30-day notice; later LLCs default to no pre-winding-up withdrawal.
- Removal after assignment is only one route. A full assignment can also end membership automatically under the applicable assignment section.
- Fair value follows dissociation by default. The agreement can change it, and the statute does not provide a full valuation procedure.
- Sole-member death has a current successor route. Do not apply the older no-member rule without checking the 2024 amendments.
Common questions
Can a member of an older Indiana LLC withdraw at any time?
Usually with 30 days' written notice, unless a written operating agreement removes that power or requires another notice.
Can a member of a newer LLC withdraw before winding up?
Only at a time or event authorized by, and according to, the operating agreement.
Does dissociation require fair-value payment?
That is the statutory default within a reasonable time, unless the operating agreement provides otherwise.
Can members remove someone without an agreement clause?
Only through the default majority-in-interest route after the person has assigned the entire interest.
Statutes and sources
- Ind. Code §§ 23-18-4-1, -5, and -8 — agreement, management, manager separation, records, and information. Official current Chapter 4 (accessed August 30, 2026).
- Ind. Code §§ 23-18-5-1, -5 to -5.1, and -7 — contributions, dissociation distributions, fair value, and wrongful distributions. Official current Chapter 5 (accessed August 30, 2026).
- Ind. Code §§ 23-18-6-4 to -6.1 — assignment, cessation, removal, automatic events, withdrawal, wrongfulness, and sole-member succession. Official current Chapter 6 (accessed August 30, 2026).
- Ind. Code §§ 23-18-9-1 to -2 — formation-date dissolution and judicial- dissolution boundaries. Official current Chapter 9 (accessed August 30, 2026).
Source links
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