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Business partner question

San Francisco, CA |

I have 5% ownership of a LLC business but I am a silent partner with no voting rights or management rights.Can my partner take me off the business just cause he feels like it?Do I have to sign anything for him to take me off.We have a contract.
He also is getting ready to close it and open in different name,can he do this without my signature.

Can i sue him ?

Attorney Answers 3


The answers to your questions are in your contract.Have a business attorney review it. While you may not be an voting member or have management rights, you have an economic interest in the business which gives you legal rights that should be governed by your contract.

Phillip M. Smith Jr.
Los Angeles Tax and Business Attorney

THESE COMMENTS ARE NOT LEGAL ADVICE. They are provided for informational purposes only. Actual legal advice can only be provided after consultation by an attorney licensed in your jurisdiction. The answer to question does not create an attorney-client relationship or otherwise require further consultation. Mr. Smith is licensed to practice law throughout the state of California with offices in Los Angeles County. He is authorized to handle IRS matters throughout the United States, and is also licensed to practice before the United States Tax Court. His phone number is 323-292-4116 or his email address is

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The question of the 5% membership may be one of dispute. Do you have a WRITTEN contract (LLC Operating Agreement) for this 5%, or an LLC Membership Certificate? If neither, your majority member may question your very ownership. An oral contract is valid, but difficult to prove.

A majority member of an LLC owes a fiduciary duty to all minority members. Any opportunities that arose during the existence of this LLC belong to the LLC itself.

Having said the above, he could close the LLC and start a new one without you, provided that you are distributed 5% of the net assets of the existing LLC.

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I signed a contract,also in 8 years I have not made a dime on the 5% because I know for a fact hes doing somthing to make it look like the business is not making money and on my taxes it says I made 0.In 8 years no money? Thats impossible.Somthing is not right.What can I do about this situtation.Theres some kind of scam going on.

Michael Charles Doland

Michael Charles Doland


First, you should request copies of the books and records for your CPA to review. Second, I agreee with Mr. Chen below tha the LLC could be disolved. I do not agree with My colleague Mr. Williams that dissolution could be followed by reincorporation of the same business, for reasons including the "corporate opportunity doctrine", breach of fiduciary duty and other reasons. If you are serious, you will have to hire an attorney to review the Operating Agreement, the detailed facts, and work with you on a strategy.


Your rights as a member of the LLC are defined in the LLC's Operating Agreement.

Generally speaking, the LLC cannot just dilute or eliminate your membership share. However, the LLC could elect to dissolve itself and wind up pursuant to the provisions of the Operating Agreement.

Frank W. Chen is licensed to practice law in the State of California. The information presented here is general in nature and is not intended, nor should be construed, as legal advice. This posting does not create any attorney-client relationship with the author. For specific advice about your particular situation, consult your own attorney.

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