Ask a Business Lawyer. Get Business Law Questions Answered ASAP.
Thank you for using our service. My name is XXXXX XXXXX I would like to assist you today.
Judicial dissolution of an LLC or other business is usually reserved as a "last resort" course of action to dissolve a business. The course of litigation takes a significant amount of money (I do not know what the value of your LLC is in relation to the expense of litigating it, but generally the cost of doing so outweighs the benefit unless you have significant equity or profits in the business. Your partner (technically the other member of the LLC) has a right to file for judicial dissolution, in the event he does so you will need to defend the action to show the value of it, and likely you will each be retaining experts to value the business, as well as arguing over the true meaning of your LLC agreement (disbursements of assets, etc.).
If at all possible, a settlement agreement, or mediated resolution (using an experienced businessman in the same field, or a business attorney with a background in your industry) will make a far more economic use of your resources. By litigating the dissolution both of you will lose assets, by mediating the differences on valuation etc. you will each save significant amounts of money and likely come to the same division of assets (this really isn't a liability case, and unless you are trying to apportion out debt vs. income for tax purposes, it doesn't make a lot of sense to litigate these things - most parties just use the judicial dissolution as a hammer in negotiations).
I hope the above is helpful, if you have any questions please do not hesitate to let me know and I will follow up quickly.Thank you for using our service, please do not forget to rate my answer when you are satisfied. I am going to transfer our conversation to the "Q&A" format to ensure you can review the entire response and that I can follow up to any questions you may have quickly. I do wish you the best of luck in this matter.
I have tried all means to compromise and get back to business. But my co owner is adamant and probably wants to own the whole business by trying to bully me into selling my stake at a throw away price.
A few more issues that I would like to bring up.
For the last 2 years LLC tax returns, our CPA deducted expenses instead of capitalizing them. Since I don't have much knowledge of LLC tax returns and went by whatever our CPA said, I signed the tax returns. Later on my partner went to another CPA to get a second opinion, who said that our original CPA committed several mistakes by deducting expenses. I immediately agreed to amending the tax returns. But my partner has been harassing me saying that I committed a breach of fiduciary duty by not reviewing the tax returns prepared by our original CPA. He is claiming that because of the erroneous tax returns his personal income dropped (He is a realtor and so claims he couldn't get loans due to the drop in his taxable income).
Can he use this against me to kick me out of the LLC?
If so, would I get opportunity to defend?
I am very much concerned as I have invested my lifetime savings in this project. He is now refusing to open the business with me. He went so far as to put the license on hold (this is for a preschool that we are working on).
My guess is that he is doing this to keep the market value low so that he can purchase the entire business (including real estate).
Isn't this illegal? What options do I have in this scenario?
Yes. I am seeing an attorney this week to find out what my options are.
I will try my best not to file a law suit as it makes matters worse and spoils the already worsening relationship. But at the same time, I will have to take some action if he does more harm to the business or tries to bully me on the tax issues.
My partner is eager to close the escrow (converting from construction loan to regular loan) but not trying to open the business. Is it possible to guess what his intentions are?
If he continues to give me headaches, I will propose to put the property on the market. This is the last resort as the business has extremely good potential (that's why he wants to go it alone).
I am also separately seeing business realtors (without his knowledge) to assess the market value of the property. In case he tries to purchase at a rock bottom price, I can present the proposal from my business realtor. Since my co owner himself is a realtor, can he not agree to go with the realtor I choose who can bring a higher value? If my partner doesn't agree can I take action?
Just out of curiosity, how much would a judicial dissolution would cost? How long would it take? If he does this, will there be any material benefit?
Yes. I meant member when I said partner. I assume he has to listen to me if I bring in a agent who appraises at a higher value than my co owner.
In case he doesn't agree, what recourse do I have to enforce this?
DISCLAIMER: Answers from Experts on JustAnswer are not substitutes for the advice of an attorney. JustAnswer is a public forum and questions and responses are not private or confidential or protected by the attorney-client privilege. The Expert above is not your attorney, and the response above is not legal advice. You should not read this response to propose specific action or address specific circumstances, but only to give you a sense of general principles of law that might affect the situation you describe. Application of these general principles to particular circumstances must be done by a lawyer who has spoken with you in confidence, learned all relevant information, and explored various options. Before acting on these general principles, you should hire a lawyer licensed to practice law in the jurisdiction to which your question pertains.
The responses above are from individual Experts, not JustAnswer. The site and services are provided “as is”. To view the verified credential of an Expert, click on the “Verified” symbol in the Expert’s profile. This site is not for emergency questions which should be directed immediately by telephone or in-person to qualified professionals. Please carefully read the Terms of Service (last updated February 8, 2012).