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TexLaw
TexLaw, Attorney
Category: Business Law
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Experience:  Internationational Commercial Attorney
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I have a LLC corporation...2 of the members are not doing their

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I have a LLC corporation...2 of the members are not doing their duties and are no longer participating in any capacity. Can I as the majority member vote them out of the corporation?
Hi,

Thank you for your question.

This situation comes up a lot with LLCs.

Do you have a written operating agreement with the other members regarding the business?
Customer: replied 3 years ago.

no unfortunately we started it uninformed. I am the "CEO" and I am the money person. I have 51% of the business verbal agreements with the other 4 members. But nothing in writing. I did a bylaws yesterday with one of the online legal services and have done a simple majority and have planned a meeting where I have asked all members to attend. At that meeting I was going to have a vote as to whether the 2 members that are not doing their jobs or participating will be voted off. Can I do this?

Customer: replied 3 years ago.

The company started in may 2013.

Thanks for your response.

Unfortunately, where there is no operating agreement which is agreed to by all the members, the Texas Business Organizations Act controls. The application sections of the Act are located at: http://www.statutes.legis.state.tx.us/Docs/BO/htm/BO.101.htm#101.107

The Act provides:

Sec. 101.107. WITHDRAWAL OR EXPULSION OF MEMBER PROHIBITED. A member of a limited liability company may not withdraw or be expelled from the company.

This means, where there has been a fundamental breach of the understanding of the members, as in your case, your only alternative is to wind up the company or to seek to buy out the other members' interests. If they will not agree to a buy out of their interest, then you can only wind up the company. This means closing the business, selling the assets and paying out everyone in a distribution according to your percent interests in the company.

Customer: replied 3 years ago.

Thanks

My suggestion is that you will need to leverage the threat of winding up against the non-active members to get them to agree to a lower buy out of their interest (perhaps even a nominal buy out). In other words, if the business just started, its likely not going to be worth much if liquidated now. If they will not agree to a buy out, you could tell them that this means they will likely get nothing for their failure to cooperate.

Please let me know if you have any further questions. Please also kindly consider rating my answer positively so that I am compensated 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.

Best regards,
ZDN
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