When Should Members Be Allowed to Join and Leave a Club?

When and how should a partner be allowed leave a club, or a new member to join? The short answer is "anytime!" For most clubs, it's common to have members leave the club for various reasons, or for club members to withdraw part of their holdings to cover some financial need (such as college tuition for a child). Clubs should also be prepared to welcome new members from time to time. It's important that your club's operating procedures set out clear policies for handling both new and departing members.

As far as withdrawals, clubs generally try to discourage members from "trading" in their club account, pulling out money and then redepositing it later on. Your bylaws may try to limit these types of transactions -- club members should consider their investment in the club to be a long-term endeavor.

That said, there will be cases where members should be allowed to withdraw funds from their club account. Besides college tuition, a member may need funds to purchase a house, start a new business, or pay for medical bills. There is no reason to prohibit members from withdrawing funds for cases like these, or, worse, forcing them to withdraw altogether from the club.

In order to balance the members' need of access to the money they've invested, as well as the club's need for a steady and growing base of capital, some clubs try to inhibit withdrawals without over-penalizing the member. But it's far more common today to only require members to pay the actual costs related to their withdrawal from the club (those direct costs expenses as commissions or fees that must be paid to liquidate or transfer stock). Clubs shouldn't try to delay withdrawals unreasonably, either. Standard practice today is for a club to pay a member completely within 30 days of the meeting at which the withdrawal was requested. It's really unfair to delay making a withdrawal payment any longer than a month or to charge an excessive withdrawal fee.

If you allow members to depart without a provision for adding new members, eventually your club would dwindle down to zero members! Most clubs add members whenever they find qualified candidates, up to the point where their club reaches the maximum numbers of members according to their partnership agreement. If you use the unit value system of club accounting, there's no problem with adding members at any time, without requiring a "buy-in."