No. The elements of fraud are the intentional or negligent misrrepresentation of a material fact that's reasonably relied on and which causes damage.
What you have here is a business dispute, so you have potential claims for breach of the LLC Operating Agreement (which may require more than 1 member to approve any loan or loans over a certain amount, or which may restrict personal loans, or may have some other restriction re: this meber or this transaction), and/or breach of fidcuiary duty of the member to the other LLC members and/or to the LLC itself. This latter brach is a "tort," meaning it comes with the threat of punitive damages.
You need to see a business litigator for help to review your Operating Agreement and discuss the facts with you. If you formed your LLC without the help of a lawyer, it's time to see one now.
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Ms. Koslyn is correct here. You need to review your company operating agreement to determine what decisions require a vote (or at least consent) of more than one member or manager. Is the company member-mangaged or manager-managed? What decisions require approval by more than one member/manager? Is there a dollar amount threshold for loans that require a majority (or unanimous) vote to approve? The answer to these questions should be included in your operating agreement.
Depending on the terms of your operating agreement, your partner may not have violated the terms of the agreement, but may be co-mingling company funds with personal funds.
It'd be best to review your operating agreement and contact a business attorney if there are any terms that you are concerned about or you believe your partner violated a term of the agreement. Feel free to contact my firm, inVigor Law Group, if you'd like to discuss any of this. (206) 745-5229Ask a similar question
I agree with both of the prior attorneys' comments. I would also add that there is a simple accounting question involved. Before you determine the extent of his wrong doing, it is important to show that he did not make any contribution to the LLC that is greater than the contributions of the other members. If he did make a greater contribution, its possible he intended that to be a loan. I would have your book keeper or accountant clarify the books and then talk to an attorney.
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You are a Member. LLCs do not have "partners". You want to avoid using the word partner to people you do business with to avoid losing the limited liability benefits of being an LLC member. Your status to outsiders can very much depend on what you tell them. You are a member of a limited liability company, not a "partner" in a partnership.
The upside of the LLC form is it allows for limited liability and very flexible terms as to operation, management and distribution of income. That flexibility is a two edged sword. While you have almost unlimited flexibility in your operating agreement, it means that there can be no one-size-fits-all analysis without a review of the agreement as outlined by the other attorneys here.
The agreement may allow him to do as he has done without a vote. Fraud is the knowing misrepresentation (and sometimes omission) of a material fact made with the intent the other person will believe the misrepresentation (or omission) and rely on it to some detriment to the victim. Fraud generally has to be proved to a clear and convincing standard of evidence. It also must be specifically pleaded and proved with detailed facts, not suspicions.
You really should take your matter to an attorney, with all relevant file materials, including your operating agreement and all details regarding the keeping of LLC meeting minutes, and all available documentation of the loan. You might want to use an attorney who is not the same as the one who set up your LLC because if legal hostilities break out, the "company lawyer" may be disqualified to represent any individual LLC member against either the LLC or another member, or both. IF he's smart, the company lawyer will send you to another attorney anyway to avoid the conflict, but may be duty bound to inform the company of imminent legalities. It puts the company lawyer in a bit of a tight spot.Ask a similar question