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Richard
Richard, Attorney
Category: Business Law
Satisfied Customers: 47025
Experience:  32 years of experience practicing law and a businessman.
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I was given an opportunity to be a partner in an LLC that would

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I was given an opportunity to be a partner in an LLC that would be owning and operating a small gentlemen’s club in Pinellas County Florida. The Price was $1000.00 per share so My brother and I purchased 10 shares initially. The split was supposed to be us at 10%, Mason at 5%, Bernie at 25%, Richard at 10%, and Mike at 50%. My brother and I then purchased an additional 5 shares at the same rate because the club needed capital which advanced us to 15% and reduced Bernie’s shares by 5%. Then Bernie died and his shares were divided up to now equate to Us at 19%, Mason at 7%, Richard at 20%, and Mike at 54%. Keep in mind that Richard is a silent partner with a private agreement with Mike so Mike is the caretaker of his shares so Mike actually holds 74%.

Since the deal was made, and the business was incorporated into an LLC, My brother and I have purchased and acquired a bunch of equipment including a lighting system and a surveillance system that we have never been reimbursed for
Submitted: 4 years ago.
Category: Business Law
Expert:  Richard replied 4 years ago.

Good evening. What bull sh__! Your additional amounts advanced were one of two things...either capital contributions or loans. If capital contributions, your ownership percentage should be adjusted; if loans, they should be evidence by a promissory note secured by the equipment for which the funds were used, and payable before any distributions to partners. If one of these outcomes is voluntarily agreed upon by the other partners, you should file a claim against them.

 

 

I hope this has given you the guidance you were seeking. I wish you the best of luck!

 

If you have a follow-up question, please remember that there might be a delay between your follow up questions and my answers because I may be helping other clients or taking a break.

 

 

The information given here is not legal advice. As all states have different intricacies in their laws, the information given is general only. This communication does not establish an attorney-client relationship with you. I hope this answer has been helpful to you.

Customer: replied 4 years ago.

no one else has paid any money in with the exception of Mike who may or may not have paid in a possible $5000. Since opening day, we have been on a down hill slope and so Mike wants to sell the business and since my brother and I will not lose nearly as much if we purchase the business verses if we just accept the loss as is, we started investigating the business to determine any potential liabilities existed. One big one is that as of April 1, 2011, the club will be 2 years behind on paying the property taxes which is required by the lease; when we asked Mike about this, he refuses to make arrangements to pay until he is forced to by the landlord's estate. I also found out, since I am one of the signers of the bank account, that Mike has been using the account for cash withdrawals, gas and other purchases, while out of state, which has nothing to do with the club or its function. The Financial paperwork that he shares with the partners do not match or balance any of the accounts including the fact that he is not reporting that he is purchasing gas when he travels back and forth to the club. Moreover, the paperwork he has filed to incorporate the business does not include or mention any of the partners thereby indicating that he is 100% owner of the company and whenever I have asked him for the paperwork or copies of the shares, he avoids the topic leaving me with the presumption that he is refusing to produce them and wondering if they even exist in the first place. Additionally, when I tell him not to include any of the equipment that was not reimbursed in the FF&E and remind him of the fact that the lighting system was on long term loan to me, not the club, he responds with, "everything is going with the club when it is sold."

 

If I remove the equipment from the club prior to the club being sold, I will completely cripple the business which I do not want to do and I feel that despite the paperwork I do have, I will be arrested for theft. If I take the equipment after the business is sold but before the new owners take possession, I also feel like I will be arrested for theft. If I leave it and let it be sold with the business, I will not be reimbursed for equipment at the value it was when it was purchased at; if at all. What do I do and what rights do I have? This may have been a stupid decision to get involved in the first place but do I really need to come to grips with the fact that I am at a complete loss???

Expert:  Richard replied 4 years ago.

What you should do is go after Mike on various levels...i) file a civil suit against him for breach of fiduciary duty, conversion of entity funds for his own use, and securities fraud in connection with the sale of securities interests in the entity; ii) contact the Securities Exchange Commission because he has violated numerous securities laws in selling you an investment in the entity...which constitute security interests; iii) contact the district attorney to pursue criminal charges for stealing your money and using it for personal use rather than company purposes, and iv) contact the IRS to report him because my guess is he is not reporting this money as income. If you want, you can tell him of these coming charges and give him an opportunity to make you whole before he risks going to jail.

 

 

I hope this has given you the guidance you were seeking. I wish you the best of luck!

 

If you have a follow-up question, please remember that there might be a delay between your follow up questions and my answers because I may be helping other clients or taking a break.

 

 

The information given here is not legal advice. As all states have different intricacies in their laws, the information given is general only. This communication does not establish an attorney-client relationship with you. I hope this answer has been helpful to you.

Customer: replied 4 years ago.

 

as far as the use of funds for his own purpose, the amounts spent out of state are below $1000.00. on the other hand, he has purchased gas in excess of $1500 from January 2010 to October 2010 without reporting either on financial documentation to the partners involved. does the low dollar amount have less of an impact of the potential prosecution crimes? The last thing I would want to do is go after him like this and then nothing happen.

Expert:  Richard replied 4 years ago.

The amounts do minimize the criminal prosecution and IRS threats, but you still have a strong civil case for fraud and damages as well as his securities violations.

 

I would appreciate it if you would please click the GREEN ACCEPT button so that I receive credit for my work; otherwise, though you have made a deposit, I do not receive credit.

Richard, Attorney
Category: Business Law
Satisfied Customers: 47025
Experience: 32 years of experience practicing law and a businessman.
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