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BizIPEsq.
BizIPEsq., Attorney
Category: Business Law
Satisfied Customers: 996
Experience:  I am a business attorney. I represent individuals and companies with all business related matters.
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My husband owns 20 % of an LLC, with two others owners owning

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My husband owns 20 % of an LLC, with two others owners owning 40% each. My husband also works for this business. One of the 40% owners told my husband that they were hiring a manager out of another town, and that if my husband didn't do what this manager told him to do, the manager could "fire" my husband and this 40% owner would not be able to help my husband. Is this legal?

BizIPEsq. :

Hello, I will be assisting you

BizIPEsq. :

First, you should know that in a LLC ownership and management of the company are two separate functions. An owner (member) is not necessarily someone who works for the company and vice versa

BizIPEsq. :

Second, the relationship between the members, their rights and expectations from them are referenced to in the operating agreement of the company

BizIPEsq. :

generally speaking, there are members (silent owners) and managing members (members who actively manage the company)

BizIPEsq. :

So, as the first step you and your husband need to review the operating agreement and see what is the status of your husband. Is he just a member or is he described as a managing member.

BizIPEsq. :

then you need to look at the majority needed to pass hiring decisions. Is it unanimous or is it majority

BizIPEsq. :

if the he is not a managing member and majority required to pass hiring decision is basic majority (over 50%) then there's not much your husband can do. If on the other side he is a managing member and the others are not, or if unanimous voting is required then your husband may have a case to invalidate that decision.

BizIPEsq. :

the bad news is that he may be subject to dismissal as an employee of the company. The good news is that unless there are provisions in the operating agreement that permit the other members to buy out your husband, his 20% are secured and cannot be taken away from him regardless whether he works for the company or not (subject to the operating agreement).

Customer:

He has been receiving a guaranteed payment since July 2008. Can they then take that away from him? This was agreed upon when they put his smaller company with their company.

BizIPEsq. :

obviously I cannot comment on the agreement your husband has but need to make sure the agreement is not subject to him working the LLC

BizIPEsq. :

is the agreement in writing?

Customer:

only on the checks he receives every two weeks

BizIPEsq. :

apologies I did not understand. Do you mean to say that there is no agreement but the checks are somehow noted?

Customer:

there is an agreement on a separate piece of paper before the legal paperwork was signed, and all the checks written by bookkeeper has it noted on it

BizIPEsq. :

I see. You need to examine the language of that agreement and make sure that the payments cannot be taken away in the event your husband is not working for the company anymore

BizIPEsq. :

In conclusion, it could be that your husband is going to maintain his payments, be a 20% owner and not have to work there, therefore you should carefully examine the language of the agreements.

BizIPEsq. :

Thank you for allowing me to assist you.

BizIPEsq. :

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