Skip to main content

In a LLC, can a partner fire a an employed partner if he has a majority ownership

Dallas, TX |

In an LLC Partnership, where two of the three partners are actually employed and working day to day within the business, can one partner, combining his ownership with the silent third partner, and excuse the third from employment?

Attorney Answers 4


  1. It depends on what your operating agreement says. You need to look closely as to the terms and provisions contained in the operating agreement. In addition, if there is an employment agreement that would be controlling. You need to sit down with corporate counsel before doing anything this drastic. There is just to much at stake and you do not want to make a mistake.

    Hope this helps. If you think this post was helpful, please check the thumbs up (helpful) tab below and/or designate my answer as best answer. Thanks.
    LEGAL DISCLAIMER
    Mr. Fromm is licensed to practice law in PA with offices in Philadelphia and Montgomery Counties and services clients in all parts of Pennsylvania. He can be reached at 215-735-2336 or at the email address listed below. He has an AV Preeminent Rating (5.0 out of 5.0) with Martindale-Hubbel, the highest possible rating for legal ability and ethical standards. Also, he has received a 10.0 rating from AVVO and was featured as a 5Star Wealth Manager in the Philadelphia Magazine, November 2009 issue on page 123.
    Mr. Fromm is ethically required to state that the response herein is not legal advice and does not create an attorney/ client relationship. Also, there are no recognized legal specialties under Pennsylvania law. Any references to a trust, estate or tax lawyer refer only to the fact that Mr. Fromm limits his practice to these areas of the law. These responses are only in the form of legal education and are intended to only provide general information about the matter within the question. Oftentimes the question does not include significant and important facts and timelines that if known could significantly change the reply or make such reply unsuitable. Mr. Fromm strongly advises the questioner to confer with an attorney in their state in order to ensure proper advice is received.
    By using this site you understand and agree that there is no attorney client relationship or confidentiality between you and the attorney responding. This site should not be used as a substitute for competent legal advice from a licensed attorney that practices in the subject area in your jurisdiction, who is familiar with your specific facts and all of the circumstances and with whom you have an attorney client relationship. The law changes frequently and varies from jurisdiction to jurisdiction. The information and materials provided are general in nature, and may not apply to a specific factual or legal circumstance described in the question or omitted from the question.
    Circular 230 Disclaimer - Any information in this comment may not be used to eliminate or reduce penalties by the IRS or any other governmental agency.


  2. Texas now calls the "operating agreement" the "company agreement." It controls the relationship between the "members". There are no "partners" in a Texas LLC. They might be taxed like a partnership but they are not partners in the legal sense. If the company agreement does not talk about voting rights of members or state a control percentage, then the Texas Business Organizations Code controls the relationship. A lawyer would need to know a lot more facts than you provide to answer your question. Whether the LLC is member-managed or manager-managed will be important. Bottom line, it is possible that two members could vote their interests to terminate the employment of a third member. But, you need to consult an attorney experienced in business organizations. DISCLAIMER: This is not intended as specific legal advice and does not create an attorney/client relationship.


  3. There are really two distinct issues here:
    1) How to you fire the partner as an employee and
    2) How to you remove the partner as a member of the LLC

    The first answer will depend on what the employment agreement says between the LLC and the partner. If he can only be fired "for cause" then you will need to find a reason to fire him.

    The second answer depends on what is written in your operating agreement, and if you have none, based on what the default LLC statutes say in Texas on how to remove a member of an LLC. Because firing him as an employee and keeping him on as a partner can result in a tricky situation, you may want to look into both issues before you proceed further.

    Legal disclaimer: The above information is not legal advice and should not be relied upon as legal advice. No representations are made in the above communication nor may any information contained herein be used in a court of law as a representation upon which you may rely.


  4. Check your company agreement. It should deal with situations involving firing LLC members as employees and with removing LLC members from the LLC. In the typical LLC, it would be possible for the LLC members (who are also likely the managers) to vote to fire the employee. However, it usually must be done following certain formalities, like having a called meeting with appropriate notice to all members and managers and having a formal vote. You really need some legal help to sort out this situation.