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I am half owner of an LLC, but invested less than half the money used to launch it. How much am I entitled to if we dissolve?

Dallas, TX |

My partner & I verbally agreed that since she had access to more money than me, that she would invest a higher percentage of the start up costs & would be paid back once we started making profit. Unfortunately, we had a falling out and decided to stop doing business with one another and have never seen any profits. She has all of the company's merchandise in her garage & refuses to give me access to any of it while continuing to make sales. I have estimated the merchandise & assets to be worth about $10,000 & have asked for $1500 for my 15% investment. She believes that she owes me nothing since she invested 85% of the start up costs & has refused all of my buy out offers. Because I own half the company, couldn't I get half the LLC's value in court? I was trying to be fair but she isn't.

Attorney Answers 3


Generally, on liquidation first assets are used to pay any debts. Next contributions are returned and then anything left over is distributed based on your profits interest which you say is 50%.

Also, I always recommend an LLC operating agreement. You can then go back to that document to review how disputes are resolved. I always recommend an arbitration clause.

Without an operating agreement you have to go back to state law.

Please consult with a business lawyer in your jurisdiction for more specific advice.

Good luck

The above statements are provided as general information and not intended as legal advice. Each matter has its own set of unique circumstances that cannot be adequately addressed without consultation. You are strongly advised to hire an attorney licensed to practice law in your state to represent you.

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The first place to look for an answer to your question would be the Company Agreement of your LLC, if there is a written Company Agreement. If there is no Company Agreement, The profits and losses of a limited liability company shall be allocated to each member of the company on the basis of the agreed value of the contributions made by each member, as stated in the company's records required under Section 101.501 [of the Texas Business Organizations Code]. TX BUS ORG § 101.201 Distributions of cash and other assets of a limited liability company shall be made to each member of the company according to the agreed value of the member's contribution to the company as stated in the company's records required under Sections 3.151 and 101.501. TX BUS ORG § 101.203 A member of a limited liability company who validly exercises the member's right to withdraw from the company granted under the company agreement is entitled to receive, within a reasonable time after the date of withdrawal, the fair value of the member's interest in the company as determined as of the date of withdrawal. TX BUS ORG § 101.205

Legal disclaimer: John Bonica is licensed to practice law only in Texas. His response is not legal advice and does not create an attorney/client relationship. The response is only intended to provide general information. The question may not include significant and important facts that would change the response. You should confer with a local attorney for competent legal advice.

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If no agreement can be reached you can file a lawsuit seeking a liquidating receivership by a court. It will, however, likely eat up any equity value.

DISCLAIMER: This is not specific legal advice and does not establish an attorney/client relationship.

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