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J.Hazelbaker
J.Hazelbaker, Attorney
Category: Business Law
Satisfied Customers: 4385
Experience:  Experienced and trained in the area of business law.
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I have a llc in texas with four partners and 2 of the partners

Resolved Question:

I have a llc in texas with four partners and 2 of the partners decided to go on their own while still connected to the llc, conducting the same business as the corp , using the company letterhead and company provided equipment. When confronted by the other partners to stop they said they wanted out of the corporation and implied in a Certified Letter that they wanted nothing more to do with the company or the corporation, in turn we applied for a dba excluding their names and ammended the llc papers to reflect the same. My question is can they still use the company name and letterhead, and conduct business as representatives of the company and ask our customers to direct funds to them personally instead of to the corporation. Can they refuse to remove themselves from the dba and contest the llc change or is what they implied applicable to our actions
Submitted: 3 years ago.
Category: Business Law
Expert:  J.Hazelbaker replied 3 years ago.
Chat Conversation Started
J.Hazelbaker :

Hello. Thank you for using JustAnswer.

J.Hazelbaker :

The acts you describe the other partners taking while they were still members of the LLC constitutes "breach of fiduciary duty" and "usurpation of corporate opportunity". The LLC has a claim against them to recover any benefit (e.g. income) they derived from those actions.

J.Hazelbaker :

Once you have a signed document that they relinquish their interests in the LLC, then they cease to have any right or power to operate under it.

J.Hazelbaker :

That means that they cannot use the LLC's equipment, name, letterhead, etc.

J.Hazelbaker :

Doing so constitutes theft and fraud.

J.Hazelbaker :

The same holds true with interacting with your customers. In addition to fraud, this would create a claim for "intentional interference with contractual relations." The LLC could sue them to stop and recover any money they gained or the LLC lost as a result of these actions.

Customer :

we dont want to persue a claim against them.. we just want to make sure what we have done so far will not be reversed.. they will disappear in time .. we would like to fade away which with thier actions .. is very ficticious to our customers

Customer :

its just annoying

J.Hazelbaker :

I see.

J.Hazelbaker :

Well, you do have several claims that you can keep in your pocket. However, understand that the statute of limitations applies and if you wait too long (a year or two) you won't be able to sue them.

J.Hazelbaker :

As long as you have a letter signed by them that states that they have relinquished any and all interest in the LLC, then they can't go back on it.

Customer :

they sent a certified letter stating they want nothing to do with us, so we did what we could do with that implied.. I dont know if they think because they did not tend to their end in a timely manner that they can change their mind

J.Hazelbaker :

Your post states that they "implied" they didn't want anything more to do with it.

Customer :

right.. it was a statment in a certified letter and in several emails.. and we acted on what they said..

Customer :

there statements directed our actions.. we warned them when the conflict started that it was against corp law to conduct business outside of the corp and that they could be removed.. but they quit before that happened

J.Hazelbaker :

As long as you have something signed by them that states that they are leaving the LLC, relinquishing their interest, and or no longer wish to be associated with it and you change the LLC Articles of Organization with the State of Texas, then they won't be able to reverse the change.

Customer :

ok.. a certified letter is that considered a signed statement .. I dont know if it has a signature .. but I can look

J.Hazelbaker :

It would be best if it had their signature on the letter.

J.Hazelbaker :

An unsigned certified letter helps, but a signed certified letter is best.

Customer :

no signature.. just their names stating the above and then their names as the sended typed at the conclusion of the letter

J.Hazelbaker :

Well, that's pretty good. They would have to sue you and deny that they wrote the letter and win that lawsuit in order to force themselves back into the LLC. Not likely. In addition, you have a bunch of claims that you could countersue them for.

J.Hazelbaker :

Considering they would have to take the action and incur the expense of suing, and considering you have numerous claims against them which could result in their being removed from the LLC anyway, you stand on pretty firm ground.

Customer :

yea.. we have a ton of fraud claims .. asking our customers to be complicit in fraud to redirect moneys to them.. probably the worst.. most of our customers regard the behavior as it appears and dont pay any mind to them..

J.Hazelbaker :

That's good.

Customer :

ok.. if they dont remove themselves from the dba because of whatever reason.. can we ask the state to remove them so that it will not be in conflict

Customer :

only one of the partners was on the original dba, and she said she didnt have the time to submit a removal

J.Hazelbaker :

Yes. You can file an amended filing. But the d.b.a. is not as important as the LLC.

Customer :

ok the llc is already done and recorded by the state

J.Hazelbaker :

I would not worry about the d.b.a. There's not much she can do.

J.Hazelbaker :

One thing you might consider is filing for a new EIN. And change bank accounts.

Customer :

could they open a bank account and cash checks with the name on them

Customer :

we did change banks and I will file for a new ein

J.Hazelbaker :

Technically, no. You can send a cease and desist letter to both them and the bank. They won't be able to register any legal entity with the same name as that name already exists. The Texas Secretary of State will deny any application with the same or similar name.

J.Hazelbaker :

Because of this, they would just be acting under a fictitious name and you shouldn't be able to open a bank account under a fictitious name.

J.Hazelbaker :

If the bank does their job, they won't be able to.

Customer :

legal enity being the llc

J.Hazelbaker :

If the bank doesn't do their job and check and let's them open an account, you should be able to shut them down with a letter to the bank.

J.Hazelbaker :

yes.

J.Hazelbaker :

or a corp. or partnership or even the filing of a "trade name".

J.Hazelbaker :

They can't use the name and the state will not allow the filing of any entity name when an entity already exists with the same or similar name.

Customer :

thats where the dba scares me .. it they are still on a dba, but not on a llc.. is there one that trumps the other

J.Hazelbaker :

The LLC trumps a d.b.a.

Customer :

I know I am overthinking this.. we have been completly wronged and if push comes to shove a suit will bring all this out

J.Hazelbaker :

A d.b.a. is simply the registration of a fictitious name. It has no real legal weight. An LLC is the creation of a separate legal entity.

Customer :

just dont want it to get to that.. should a lawyer send the cease and disist

J.Hazelbaker :

The LLC takes priority.

Customer :

ok.. thanks on the dba

J.Hazelbaker :

It would make more of an impression coming from an attorney. But, there's no requirement. You could also simply "cc" your attorney, to show them that your attorney is getting a copy of the cease and desist.

Customer :

I feel comfortable with what you have said .. thanks.. for the advice

Customer :

I will accept and if you think of any tips or things to watch.. just add it in thanks, again

J.Hazelbaker, Attorney
Category: Business Law
Satisfied Customers: 4385
Experience: Experienced and trained in the area of business law.
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