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As a managing partner with a minority share in a Nevada based LLC, can I give the other partner notice and leave the LLC ?

San Diego, CA |

I am a partner in a LLC registered in Nevada but do not have the majority share. Business seems to be going nowhere. We have no operating agreement. Can I give the partner written notice and leave the LLC ?

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Attorney answers 5

Posted

That should not be a problem. Make sure you have not signed any personal guarantees.

The above is general legal and business analysis. It is not "legal advice" but analysis, and different lawyers may analyse this matter differently, especially if there are additional facts not reflected in the question. I am not your attorney until retained by a written retainer agreement signed by both of us. I am only licensed in California. See also avvo.com terms and conditions item 9, incorporated as if it was reprinted here.

Posted

And make sure you follow all terms of the operating agreement about leaving the LLC

Asker

Posted

As stated in my original post, we have no operating agreement.

Posted

CA law expressly gives members of CA LLCs the right to withdraw.

However, I am not familiar with NV law. You should re-post your Q under NV to obtain responses from lawyers familiar with applicable laws.

This information does not constitute legal advice and does not establish an attorney-client relationship.

Posted

Yes, you can. I understand that the company does not have an operating agreement and that you do not therefore have a guide regarding resignation. I recommend that you put the resignation in writing, that you resign as a managing member, assuming you were designated as such. Managing members are members who participate/are involved in the management of the company. As stated by my colleagues, you want to ensure you are not subject to company liabilities, such as personal guarantees, leases, etc. As you have an ownership interest in the company, you will want to discuss the return of your capital with your CPA and then with the other partner(s).

This answer does not constitute legal advice and is provided for informational purposes only.

Posted

I must beg to differ with some of what my colleagues have said.

Unlike California (but like Delaware and most other states), Nevada does not have an overriding statutory provision allowing a member to withdraw until the company is dissolved and wound up. Moreover, attempting to do so may open you up to liability.

See http://www.leg.state.nv.us/NRS/NRS-086.html#NRS086Sec335

NRS 86.331 Resignation or withdrawal of member: Limitation; payment to member who rightfully resigns or withdraws.
1. Except as otherwise provided in chapter 463 of NRS, other applicable law, the articles of organization or the operating agreement, a member may not resign or withdraw as a member from a limited-liability company before the dissolution and winding up of the company.
2. If a member has a right to resign or withdraw, the amount that a resigning or withdrawing member is entitled to receive from the company for his or her interest must be determined pursuant to the provisions of this chapter, chapter 463 of NRS, the articles of organization or the operating agreement. If not otherwise provided therein, a resigning or withdrawing member is entitled to receive, within a reasonable time after resignation or withdrawal, the fair market value of his or her interest on the date of resignation or withdrawal.
(Added to NRS by 1991, 1301; A 1993, 2012; 1995, 2111; 1997, 719)

NRS 86.335 Resignation or withdrawal of member in violation of operating agreement; loss of right to participate upon resignation or withdrawal. Except as otherwise provided in this chapter, chapter 463 of NRS, the articles of organization or the operating agreement:
1. If the resignation or withdrawal of a member violates the operating agreement:
(a) The amount payable to the member who has resigned or withdrawn is the fair market value of his or her interest reduced by the amount of all damages sustained by the company or its other members as a result of the violation; and
(b) The company may defer the payment for so long as necessary to prevent unreasonable hardship to the company.
2. Except as otherwise provided in chapter 463 of NRS, the articles of organization or the operating agreement, a member who resigns or withdraws ceases to be a member, has no voting rights and has no right to participate in the management of the company, even if under this section a payment due to the member from the company is deferred.
(Added to NRS by 1997, 714)

This answer is provided for informational purposes only and does not constitute legal advice. I am licensed to practice law in the State of Delaware and this answer assumes Delaware law applies to the question unless otherwise stated. Unless and until we enter into a formal written engagement agreement, neither Berger Harris, LLC nor any of its attorneys represent you or have any duties toward you. This information is not intended to create, and receipt or review of it does not constitute, a lawyer-client relationship. Internet subscribers and online readers should not act upon this information without seeking professional counsel. Do not send us information until you speak with one of our lawyers and get authorization to send that information to us. In some jurisdictions, this World Wide Web site may be considered advertising. Before making your choice of attorney, you should give this matter careful thought. The selection of a lawyer is an important decision that should not be based solely upon written information about our qualifications and experience. Berger Harris, LLC has endeavored to comply with all known legal and ethical requirements in providing the information found on this website. Berger Harris, LLC does not desire to represent clients based upon their review of any portions of this website that do not comply with legal or ethical requirements in their jurisdictions.

Brian M Gottesman

Brian M Gottesman

Posted

You may, however, be able to petition the courts in Nevada to order a dissolution under a deadlock or similar provision.

Asker

Posted

Brian. Im a little confused. Are you saying that I am opening myself up to liability if I resign from a NV LLC that does not have an operating agreement ?

Brian M Gottesman

Brian M Gottesman

Posted

In 86.335, the LLC may claim that you damaged it by an unauthorized withdrawal, and deduct the amount of the "damage" from any amount they pay out to you.

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