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TexLaw, Attorney
Category: Legal
Satisfied Customers: 4430
Experience:  Lead trial/International commercial attorney licensed 11 yrs
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The majority holder of the LLC where I am a minority letter

Resolved Question:

The majority holder of the LLC where I am a minority letter just sent a letter to myself and another minority member stating as of Monday we will be hourly employees. I have not agreed to a buyout nor has the buyout been offered. What can I do? No operating agreement either.
Submitted: 5 years ago.
Category: Legal
Expert:  TexLaw replied 5 years ago.
How can you prove you are a member of the LLC without an operating agreement? Is your name listed on the certificate of formation with the state?
Customer: replied 5 years ago.
Paperwork that was filed with the state. Tax returns from the company.
Expert:  TexLaw replied 5 years ago.
Since there is no operating agreement, the terms of your relationship and rights of membership to the LLC are governed by the certificate of formation filed with the state and with the Nevada Limited Liability Company Act:
(unless the certificate of formation states that another state's LLC Act will control).

The Act provides that membership in the LLC can't simply be destroyed. So your instinct is correct. The majority owner can't simply convert you to an "employee" and terminate your membership interest. However, the majority owner can terminate your right to be a manager of the LLC and make you an employee for the work you actually do for the LLC. That means if you are getting a regular pay check from the LLC as a manager or something similar, the majority owner can change this arrangement by virtue of his majority control of the company. However, this change from your current status to an "employee" does not change the amount you own of the company as a member. Your membership entitles you to access to the company books and a percentage of the profits distributed. It also allows you to assert a lawsuit against the majority owner if he/she is doing something which is not in the company's best interests. As a member, you can also file suit and request that the company be wound up and the assets distributed pursuant to the percentage ownership of each member.

Please let me know if you need further detail on any of this information, or other advise in regard to this issue.

Best of Luck,
Zachary D. Norris
Customer: replied 5 years ago.
And if I don't wish to be an employee? Would not going into work as an employee jeopardize a lawsuit?
Expert:  TexLaw replied 5 years ago.
If you don't go in to work, you will not be entitled to any regular payments for work that the company was making to you and the company may have to hire someone else to do what you were doing, which means that there will be less profits to distribute to you. As a member, you are entitled to a share of profits. However, if you are working, you are also entitled to payment. Going in to work as an employee and attempting to seek a buy out is a much stronger position in court, as it shows you have an active interest in the company and that you are not attempting to hurt the company. Remember, as a member, you have a duty to not do anything that injures the company. If after you file a lawsuit to split the company up the majority member decides to buy you out and keep the company as an ongoing business, that is his decision. As long as you don't do anything to hurt the revenue stream of the company, you are in a better position.

That being said, there is nothing that prevents you from refusing to go to work as an employee. You are still a member and are still entitled to a share of the profits and have ownership of company assets that must be bought out or the company and the majority member face litigation.
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