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Zachary
Zachary, Attorney
Category: Legal
Satisfied Customers: 3915
Experience:  Lead trial/International commercial attorney licensed 11 yrs
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Im currently a managing member of a LLC along with a minor

Customer Question

Im currently a managing member of a LLC along with a minor (15 years of age). Being foolish and agreeing to go ahead and crate the company, me and him as signed as managing members. Now after 4 months the foundation of the company is beginning to shake because of a 15 year old ego and stubborn stuck up personality. My question is how could I go about ridding him from the company. We dont have much, if any, legal documents signed like a Operating Agreement. So what options do I have to have him removed from the company.
Submitted: 10 months ago via Cornell Legal Info Institute.
Category: Legal
Expert:  Zachary replied 10 months ago.
Hi,

My name is XXXXX XXXXX I will be assisting you with your legal question.

Unfortunately, because there is no operating agreement, the law in Florida provides that a member of an LLC may not be removed by another member. So, your only options here are to: (1) buy out the minor's interests or (2) dissolve the LLC and start the business over.

Because you are the managing member, you are able to dissolve the LLC without his consent. If the LLC has property, the law requires that you divide the property to each member according to that members proportional share in the LLC. In this case, it is 50% each.

The form you would use to dissolve the LLC is: http://form.sunbiz.org/pdf/cr2e048.pdf

Please let me know if you have any further questions. Please also kindly consider rating my answer positively so that I am credited by the website for my work on your question. Rating positively does not cause an additional charge and does not prevent us from further discussing your questions.

Kind regards,
Zachary
Zachary, Attorney
Category: Legal
Satisfied Customers: 3915
Experience: Lead trial/International commercial attorney licensed 11 yrs
Zachary and 16 other Legal Specialists are ready to help you
Customer: replied 10 months ago.

When forming the LLC I listed the minor as a managing member as well, would I still be able to dissolve the LLC? Also even though the majority of all purchases were made with my invested money and under my name, I would still have to divide the property 50 50?

Expert:  Zachary replied 10 months ago.
Nope. A minor cannot actually be a managing member of an LLC because a minor does not have the right to enter into a binding contract.

When you invested the money, this formed a capital account. You need to take the grand total of the value of all the property you have and any income that is due to you, then out of that you take the amount you invested and pay yourself back, anything remaining you split 50-50.

Here is an article which discusses this issue in further detail: http://www2.sunysuffolk.edu/rosesr/ACC102/Lecture/12.3.LiquidationPartnership.pdf

Note that LLC members are treated exactly the same as partners in dissolution scenarios.
Customer: replied 10 months ago.

If I were to go with buying him out, could I offer to keep him as staff but not as a owner/Co-owner rather then having him removed entirely?

Customer: replied 10 months ago.

Also he currently has access to pretty much everything that a Owner would have access to. In the event he decides to go off in spite due to the dissolution or from being bought out and changes passwords or cause irreparable damage to data on our servers, would I be able to pursue legal action?

 

An if I'm able to buy him out, would I be able to change the name under the LLC without dissolving it and would this ensure that he wouldn't have a further connection to the companies start up?

Expert:  Zachary replied 10 months ago.
I'll answer your questions separately below:

1. If I were to go with buying him out, could I offer to keep him as staff but not as a owner/Co-owner rather then having him removed entirely?

A: Yes.

2. In the event he decides to go off in spite due to the dissolution or from being bought out and changes passwords or cause irreparable damage to data on our servers, would I be able to pursue legal action?

A: Yes, you can sue him for negligence and misapprorpriation.

3.An if I'm able to buy him out, would I be able to change the name under the LLC without dissolving it and would this ensure that he wouldn't have a further connection to the companies start up?

A: No, changing the name of the LLC does not change the fact that he is a member. You have to dissolve it.
Customer: replied 10 months ago.

3a. Buying him out of his ownership rights would void him from being a member, in which case it would be safe to keep the LLC name as is, right?

Expert:  Zachary replied 10 months ago.
Yes, in exchange for the money for his interest, he transfers the ownership of that interest to you. You would need to document the buy out in a Membership Transfer Agreement: http://www.lawmart.com/forms/bus-lc11.htm
Customer: replied 10 months ago.

Can the buy out consist of a trade like him remaining in the company as staff rather then buying him out with money.

Expert:  Zachary replied 10 months ago.
Yes, it can consist of anything you both agree to.
Customer: replied 9 months ago.

Where in the following form would I place the terms of trade since I wont be buying out with money.


 


 


 


Transfer Agreement: http://www.lawmart.com/forms/bus-lc11.htm

Expert:  Zachary replied 9 months ago.
Take out sections 2 and 10, and in 1, after "In consideration therefore"b put "buyer agrees to offer seller as payment__________(and then describe the employment terms)."

Also, you want to put something like a limitation on the term of employment...something like "seller shall be employed as _____________ and shall receive _________(pay) for a term of two years. After two years, buyer may renew seller's employment for another one year term." This way it will appear that the consideration is adequate and you can terminate him after the term if you want (you can also reduce the term if he is agreeable).
Customer: replied 9 months ago.

Though hes a minor, is he still able to sign this so long as we have witnesses?

Expert:  Zachary replied 9 months ago.
That's a good point. Smart thinking.

The long and short of it is that he can claim that he was not able to contract (as long as he is still a minor when he makes the claim) and try to get out of it.

If you can get him to agree to it, and keep him happy until he's 18, then you could ask him at that point to sign a confirmation agreement of the earlier agreement (essentially a short document which says "I__________(his name), confirm and agree to the agreement signed on _______(date) transferring my membership to _________(your name)." and then have him sign it.

Otherwise, the only route you can go right now which has absolute certainty is to dissolve the LLC.
Customer: replied 9 months ago.

Well after long thought and consideration I came to the same conclusion. So in doing so I will for certain be able to break all ties that he has with the company?

Expert:  Zachary replied 9 months ago.
Yes, by dissolving the LLC, you break all his ties.
Customer: replied 9 months ago.

I have a sample Operating Agreement; what description would I put for the occurrence that resulted in the limited liability company’s dissolution.

 

"4. A description of occurrence that resulted in the limited liability company’s dissolution pursuant to section 608.441, Florida Statutes, (copy 608.441 on back cover letter)."

 

 

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