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Zachary
Zachary, Attorney
Category: Business Law
Satisfied Customers: 3818
Experience:  Internationational Commercial Attorney
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I have an LLC that didnt work out. I intend on keeping the

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I have an LLC that didn't work out. I intend on keeping the business name as we have built up a small clientele. I have emailed her to tell her I want to continue on and that I will pay her back all of her investment. I advised her I removed her from anything that would incur more debt IE monthly software, association fees, etc. I asked her for keys back that she has of the clients and the PO Box key.

I have not heard anything from her since sending the email several days ago. What recourse do I have regarding the keys of the clients? the rest of it I am assuming just doesn't matter if she fails to contact me. I can always mail her a cashier's check and just remove her name from the bank account. She also should have received a payment for one job that I asked her about. I don't know how to proceed in getting the keys.
Submitted: 1 year ago.
Category: Business Law
Expert:  Zachary replied 1 year ago.
Hi,

Thank you for your question.

Are you saying that you formed the LLC with two members which you wish to dissolve?
Customer: replied 1 year ago.

Yes, with one other person. I know we could dissolve and split what money we have earned 50/50. However, I wish to continue on with the name. So I offered her 100% of her money back. I did just notice that while the state did not ask for any other information to register the LLC the IRS did ask for how many people were in the LLC and I said 2.

Expert:  Zachary replied 1 year ago.
Thank you for your question.

Unfortunately, it is not as simple a matter as you may believe.

An LLC can only be dissolved through the agreement of all the members or through an order from the court. If she has not given you her agreement to dissolve the LLC, then you cannot legally continue the business without her. She is legally entitled and owns half the business as a co-member.

Now, your offer to buy her out by returning her investment will be sufficient only if she agrees to it. You can't force it on her.

If she does not agree to cooperate and either let you buy her out, then you have to go to court to force her out.

So, you need to track her down and get her to agree to let you buy her out (get it in writing) and then get the keys from her. This may require you to go physically find her, rather than simply sending emails. Without her written agreement of a buy out, you will need to dissolve the LLC through the court.

-ZDN
Customer: replied 1 year ago.

Oh I intended on going to get keys, but what right do I have to them if we have not legally dissolved it, yes? So, if I have to go to court to dissolve without her permission, which I am going to assume she isn't going to give since she isn't answering my calls or emails.


 


How do I go to court to remove her? Can I remove her and keep the name since there is clientele? And I have no paperwork with her name on it, so how do I even prove she is part of it, if she denies it? I am confused as to how legally she is in it if her name isn't anywhere.

Expert:  Zachary replied 1 year ago.
Well, there are two ways you can look at this situation. If she is not a sophisticated business person, then she likely does not know her rights. Further, if there is nothing on paper which shows that she is actually a member of the LLC, and you are the incorporator, then you could in good faith state that she is only an investor, rather than a member. That means that you could argue that she has no membership rights. This could result in her suing you for breach of contract. But that places the burden on her to take action. The other route is to go to court, admit that she is a member, and ask for a dissolution.

If you go the route of making it her problem of proving she is a member, then the only remaining question is how do you force her to turn over the keys. Unfortunately, here again, the only way to force someone to do something is to get a court order. Here, you could sue her in small claims court to get her to turn over the keys, as you can assert that she has stolen company property.

So just to make clear, here is what I think you need to do:

1. Track her down and tell her she needs to hand over the keys so that you can continue running the business while you guys figure a fair way to buy her out.

2. If she refuses, tell her that she is not actually a member of the LLC because she doesn't have any paper with her name on it and that it is your LLC and she is only an investor. Tell her that you are going to pay her back her investment and that she will walk away, but that she has to hand over the keys immediately or you will sue her for conversion and fraud.

3. If she still refuses, file a small claims lawsuit against her (with you as the LLC) stating that she has stolen company property and will not return it and ask for an order compelling her to turn over the keys or pay the fine for having the locks rekeyed.

4. You need to understand that she could assert at the court that she is a member of the LLC and has a right to the keys just as much as you do. If she does this, then she will have to prove that she is a member and then the court will proceed with dissolving the LLC (or refer you to a higher court to do so).

Please let me know if you have further questions on this matter. Please also remember to rate my answer positively so that I might receive compensation from the website for my work on your question.

Thanks
-ZDN
Customer: replied 1 year ago.

so, if I admit up front she is a member the only answer is to dissolve? All the rest of your answer I understand completely, and thank you for your time!

Expert:  Zachary replied 1 year ago.
Yes, if she is a member, and the two of you cannot agree on a buy out, the court will dissolve the LLC. The only way to get around this would have been to have an LLC agreement which provides a forced buyout procedure.

Please let me know if there is anything further I can do for you.

-ZDN
Zachary, Attorney
Category: Business Law
Satisfied Customers: 3818
Experience: Internationational Commercial Attorney
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