6 yrs ago I opened a specialized school in which I was main owner. I am knowledgable in this particular area (Other member is not), & brought a business plan & expertise into the LLC. A family member invested/loaned $300,000 to help with the initial start up & in return received 1/5 of business ownership.She is still working in the business, refuses to leave, & says she cannot trust me & that she needs to stay to protect her investment. The business is barely profitable & still in debt, though being pd off.Our relationship has become hostile & there are constant power struggles. I either want out or for her to withdraw. How do I get out? I am afraid, because threats of suing me have come up if I leave or start another business on my own. How do I proceed? We have no operating agreement.
You need to get an attorney for sure. These matters are factually intensive. Without an operating agreement, the State through its statute, sets forth the rules of operation. So, your starting point will be the staturoy language for the State of formation (Florida?). If there is no operating agreement, there is probably nothing to prevent you from from starting out in your own business.
A common sense approach would be for you to send a letter to the other member(s) that you are withdrawing and assigning any interest you have in the LLC to the other member(s). Send it via certified and first class mail.
This answer is provided for general information only. You should seek advice from an attorney in your jurisdiction. Good luck. Marty Davidoff, email@example.com, 732-274-1600
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"We have no operating agreement." is the broken record that I see repeated on this site from individuals seeking assistance in resolving issues regarding LLC's. This is the most poisonous ingredient in the failed recipe of most LLC business ventures. Ask yourself what would America be without a Constitution?? A dismal failure!
The typical legal answer would be when there is no operating agreement, look to the governing statutes of your state to determine how to dissolve the business,and/or allow you to withdraw and start over. This will probably not work in your case because your partner has substantial assets, and can (and should) sue you if you try to withdraw/bail out on her $300,000.00 investment.
You need to look deep into your soul and face the stark reality that this is completely your fault, and you have to take full reponsibility for making this business work. Why? BECAUSE YOU BROUGHT A BUSINESS PLAN AND EXPERTISE TO THE LLC AND CONVINCED A FAMILY MEMBER TO INVEST IN IT WITHOUT AN OPERATING AGREEMENT. You need to face the stark reality that you deserve to be sued into oblivion for doing such thing, and you don't deserve to run away from what you have done to your investor who is also a member your family. (You could be sued for everything gross negligence to securities fraud.)
In my opinion, you only have one option. Contact a lawyer and begin negotiating an operating agreement with your partner, no matter what it costs, or how long it takes, and how much @#$ you have to listen to. Educate yourself on the mistakes you have made (if you don't, you will only make the same mistakes again). Swallow your pride and admit unconditionally to your partner that you have screwed up and will do whatever it takes to gain her trust and make this business work.She has every right to distrust you if you represented to that you has superior knowledge on running this business without an operating agreement!
You may not like this advice, but this is my truth for you. This is also an excellent oportunity for your personal growth to become the business leader and educator you were meant to be. You will have to walk through the fire to get there!
Phillip M. Smith Jr.
Los Angeles Tax and Business Attorney
Licensed in the United States Tax Court
Call: 855 IRSTAXBIZ
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 firstname.lastname@example.org.
Real Estate Attorney
This is a complex situation both from the problems with the structure of the LLC and the question of how to characterize the $300,000 paid by the family member. It is not the kind of question that can adequately be answered in an online forum. You should contact an experienced business lawyer in your area for help.
Disclaimer: This answer is provided for informational purposes only, does not constitute legal advice, and does not create an attorney-client relationship. Actual legal advice can only be provided after completing a comprehensive consultation in which all of the relevant facts are discussed and reviewed.
Limited Liability Company (LLC) Lawyer
I am an experienced llc, corporate and business transactions attorney licensed in FL and NY and have handled transactions regarding schools. If your llc is located in or organized under the laws of FL or NY, I would be pleased to advise you regarding this matter upon completion of my law firm's conflicts of interests and background checks and signature and delivery to my firm of its prescribed engagement letter agreement. See www.orlinlaw.com .
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