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MShore Law
MShore Law, Attorney
Category: Business Law
Satisfied Customers: 25285
Experience:  Drafted Negotiated and/or Reviewed Thousands of Commercial Agreements
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I am a member in a 2 person LLC. the operating agreement has

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I am a member in a 2 person LLC. the operating agreement has a non-compete clause (50-50 voting rights). One member has been discovered to be secretly competing with LLC, in clear violation of op agreement. Removals clause in OP agreement states that a manager may be removed from board of management as determined by all members (provided that the vote of the member to be removed as manager shall not be required). Does that mean that in the case of breach the management quorum can be overridden and a resolution to remove the member can be passed, or does it mean that the removal can't happen without the consent of the member in breach?
Thank you for the post, I am happy to assist you by answering your questions. It means that the member not in breach can override the quorum requirement and remove the member. Your operating agreement should contain an arbitration clause or clause providing that disputes regarding removal of a member shall be subject to a objective and uninterested third party vote. If you remove the member, a lawsuit could be the result as you are effectively "judge and jury" by virtue of less than perfectly drafted operating agreement language (based only on the sections you reference).
Customer: replied 5 years ago.
I was looking for the clause about 3rd party arbitration, and i realize that this operating agreement is for an OHIO LLC. This LLC was initially formed in Ohio, and then a conversion to a florida llc was made. the ohio llc is dissolved. Same name, same EIN etc, just a change of state. Is this operating agreement invalid then?
No, the OA is still valid, to save yourself the headache of litigation should your partner sue, propose arbitration to resolve the dispute between the two of you, indicating that if the less costly resolution of arbitration is not selected both parties will likely incur substantial legal fees to arrive at the same conclusion.
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