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Invested into an internet start-up with my friend.Can I dissolve a 50/50 split LLC due little or no contribution from my friend?

2 years ago I and my friend formed an LLC for an internet startup we set out to build. I agreed to a 50/50 split,he was in charge of managing the development and I agreed to invest about $6k to get the beta site built .This was supposed to take less then 6 months.. It's now been close to 2 years and nearly $20K and we're just getting close to our goal of getting this done. Over the past 2 years, my partner has made several unnecessary & insignificant changes and redesigns.He just racked up the bills and kept sending them my way till I took everything into my own hands. I have come to realize that my partner has little to no experience, knowledge or business acumen necessary to get this done. Since then his contribution has been nonexistent, refuses to put in any legwork etc. What can I do?

Seattle, WA -

Attorney Answers (3)

Gavin Nathaniel Johnson

Gavin Nathaniel Johnson

Business Attorney - Bellevue, WA
Answered

When you formed the company did you create an Operating Agreement for the LLC? This document should include provisions that spell out how a member can dissolve the company (generally under the default provisions in Washington, you can see them here http://apps.leg.wa.gov/rcw/default.aspx?cite=25...), and also how members can withdraw from the company. You can always force a dissolution of the company if it is not reasonably practical to carry it on, i.e. it cannot pay its debts when due or members quarreling to the point that they can't run the business.

In addition, did you agree to loan the money to the company to pay off its expenses with the understanding that you would be paid back? If so, did you document this in writing?

As the prior answer discussed, you can always discuss buying out the interest of your partner for a certain amount of money. It sounds like the business hasn't taken off yet, and you've done the majority of the work so you may be able to buy him out for a relatively small price. This all depends on whether you want to stay in the business and continue to develop it, or you want to simply withdraw and walk away from it.

You should take a look at the operating agreement, which should detail your options. You should contact a business attorney to discuss exit options or buy-out options in order to determine which makes most sense for you. I'd be happy to assist you with this. You can reach me directly at gavin@invigorlaw.com.

Michael Duane Daudt

Michael Duane Daudt

Insurance Law Lawyer - Seattle, WA
Answered

From the way that you've asked this, it sounds like there is no buy-sell agreement or LLC operating agreement provision in place to guide you. On that assumption, as a practical matter you have only three choices--(1) buy him out at whatever price you can negotiate, (2) walk away and let it just die on its own, or (3) file a lawsuit to dissolve the LLC under RCW 25.15.275. The third option is not a "slam dunk," because you have to prove that "(1) It is not reasonably practicable to carry on the business in conformity with a limited liability company agreement; or (2) other circumstances render dissolution equitable." Dissolution cases can actually get very messy and expensive, so if there is an LLC asset that is worth paying for you should consider making an offer to buy him out before pursing a judcial dissolution.

Robert V Cornish Jr.

Robert V Cornish Jr.

Business Attorney - Washington, DC
Answered

What does your LLC operating agreement say? You can always offer to buy him out.

The foregoing is not legal advice nor is it in any manner whatsoever meant to create or impute an attorney/client... more

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