LLC Buyout Clauses in New York: When a Member Wants Out at Year End

The Short Answer

Whether you can leave a New York limited liability company, and what you are paid when you do, depends first on the operating agreement. Unless the operating agreement provides otherwise, a member may not withdraw before the company dissolves and winds up. N.Y. Ltd. Liab. Co. Law § 606(a).

So if your operating agreement has no exit or buyout provision, you generally cannot resign and demand your share. The realistic paths are a negotiated buyout, a sale the agreement permits, or, in a serious case, a petition to dissolve the company.

What the LLC Law Says When a Member Wants Out

Leaving. A member may withdraw “only at the time or upon the happening of events specified in the operating agreement and in accordance with the operating agreement.” § 606(a). For a company formed before that rule took effect, the version of section 606 in force at the time still governs unless the operating agreement provides otherwise. § 606(b). The formation date matters.

Getting paid. Where the agreement allows withdrawal but says nothing about the price, the withdrawing member is entitled to receive, within a reasonable time, “the fair value of his or her membership interest” as of the date of withdrawal, based on the member’s right to share in distributions. § 509. “Fair value” with no formula behind it is a common reason buyouts end up in court.

Selling. Unless the operating agreement provides otherwise, a member may assign the interest, but the buyer receives only the economic rights, meaning the distributions and allocations of profit and loss. The buyer does not become a member or take part in management. § 603(a). Many operating agreements restrict transfers further, and few outsiders will pay much for a minority interest that carries no vote.

Dissolution. A member may ask the Supreme Court to dissolve the company when “it is not reasonably practicable to carry on the business in conformity with the articles of organization or operating agreement.” § 702. That is a demanding standard and a lawsuit, not an exit plan. See my page on LLC dissolution in New York.

What a Workable Buyout Clause Covers

• Triggers. A voluntary exit, death, disability, divorce, retirement, the end of a member’s work for the company, a deadlock, and a member’s breach.
• Price. A formula, an appraisal by a stated method, a value the members agree on each year, or book value. Each one favors someone, and an agreed value the members never update is the classic trap.
• Valuation date. Often the end of the fiscal year before the exit, so the number ties to financial statements that already exist.
• Buyer. The company (a redemption) or the remaining members, and whether the purchase is optional or required.
• Payment terms. A lump sum or a promissory note, with the interest rate, the term, any security, and what happens after a missed payment.
• Funding. Life insurance on each member where the agreement requires a buyout at death.
• Restrictions after the exit. Confidentiality, non-solicitation of clients and employees, and any non-compete, each drafted to be enforceable.
• Closing documents. The purchase or redemption agreement, the note, mutual releases, the members’ written consent, and the amended schedule of members.

Be careful with a “shotgun” buy-sell clause, in which one member names a price and the other must either buy or sell at that price. It favors the member with more cash, and it can be triggered at a bad moment for you.

Leaving at Year End

Members often want out on December 31 so that the exit lines up with the books. Before you give notice:

• Read the notice requirement. Some agreements require written notice a set number of days before the effective date, sent to a specific address.
• Settle this year’s distributions. Agree in writing on who receives distributions for the current year and when.
• Involve your accountant. Have the tax allocations for the year of exit reviewed before you sign.
• Get off your guarantees. Ask the company and the remaining members to replace you on any lease, loan, or line of credit you personally guaranteed. A buyout that leaves your guarantee in place leaves you liable for a business you no longer own. See my article on personal guarantee lawsuits in New York.
• Exchange releases. Get mutual releases in writing, in both directions.

If you are one of the members staying, the same list applies from the other side, and the remaining members’ written consent is what makes a redemption binding on the company.

If Your Agreement Has No Buyout Clause

Start with a negotiated buyout. A written redemption or purchase agreement, a promissory note if the price is paid over time, mutual releases, and the members’ written consent can be prepared quickly once the members agree on a number. If the other members will not discuss it, or you cannot see the company’s books, a written demand to inspect the company’s records is often the first step; see my page on LLC member disputes.

If you are staying in the company, this is also the time to add a buyout clause to the operating agreement, before the next member wants out.

Send Me the Operating Agreement

I review and draft operating agreements, buyout clauses, and member buyouts for a flat fee. Within one business day, I quote a flat fee for the work. Nothing is billed until you accept. Details are on my flat-fee contract review page.

Related: LLC Member Disputes · LLC Dissolution · Flat-Fee Contract Review · All Articles

This article is general information, not legal advice, and does not create an attorney-client relationship. It describes the New York Limited Liability Company Law as of November 2026. Attorney advertising.