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I am a 30% partner in a NY State LLC. The LLC was formed in…

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I am a 30% partner...
I am a 30% partner in a NY State LLC. The LLC was formed in December of 2010. Note: We have still not filed our articles of publication as required by Section 206 of the New York State Limited Liability Company Law.
We have 2 paying clients, one that pays $50/month for access to our website and one that paid $1000.00 up front for two years of access to our website. There is still approx 18 months left in that (verbal) contract. Our income from those clients has been and is being used to pay for our web server space, which keeps the website up and running. My partner (CEO at 70% interest) has decided that instead of being in business with me, he would like to work directly with a web developer and has asked that I step down from my current role as COO and co-founder. He offered either 2% lifetime equity as a non-participatory founding member or a negotiated buy out amount (which is absurd as the value of the company now is close to zero.) He has also mentioned just dissolving the current LLC entirely and starting over the exact same business on his own, although I believe he knows that he can't do that exactly. Or can he?
Note: Our LLC Operating Agreement has the following clause concerning dissolution:
"8.1 Dissolution. The Company shall be dissolved upon the first to occur of the following events:
(a) The vote of Members holding a majority of the outstanding Membership Interests to dissolve the Company.
(b) Entry of a decree of judicial dissolution under Section 702 of the New York Limited Liability Company Law.
(c) At any time there are no Members, provided that, the Company is not dissolved and is not required to be wound up if, within 180 days after the occurrence of the event that terminated the continued membership of the last remaining member, the legal representative of the last remaining Member agrees in writing to continue the Company and to the admission of the legal representative of such Member or its assignee to the Company as a Member, effective as of the occurrence of the event that terminated the continued membership of the last remaining Member.
8.2 No automatic dissolution upon certain events. Neither the death, incapacity, disassociation, bankruptcy or withdrawal of a Member shall automatically cause a dissolution of the Company."

SO, my questions (finally!) are these - Can he dissolve without my input? Can he keep the LLC in tact and force me out? It looks like he can dissolve the company without me being able to do much. Is that the case? Also, is there a way to accept a 2% lifetime interest and still maintain the option to buy back in to the company or ensure that the interest amount isn't subject to further dissolution at a later date?
Submitted: 5 years ago.Category: Legal
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Answered in 8 minutes by:
3/13/2012
Lawyer: Dimitry K., Esq., Attorney replied 5 years ago
Dimitry K., Esq.
Category: Legal
Satisfied Customers: 41,221
Experience: Multiple jurisdictions, specialize in business/contract disputes, estate creation and administration.
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Thank you for your questions. I will be happy to answer your questions in order, and be happy to assist with your follow-up concerns.

Can he dissolve without my input?
Based on the language, he can. The language discusses "majority" meaning votes, rather than how many partners may be in the business. Even if he was a 70% owner and there were two partners sharing the 30%, he as a 70% owner could still dissolve.

Can he keep the LLC in tact and force me out?
No, he would have to pay you for your share, as you do own 30% of the current assets and future profit (from today's date, or date of dissolution or buyout).

It looks like he can dissolve the company without me being able to do much. Is that the case?
Yes.

Also, is there a way to accept a 2% lifetime interest and still maintain the option to buy back in to the company or ensure that the interest amount isn't subject to further dissolution at a later date?
That is up to the other owner, if he chooses not to provide such an option, you cannot compel him to take that option. It would be at your discretion and his to accept, you could not unilaterally push that option on him.

Good luck.
Dimitry K., Esq.
Category: Legal
Satisfied Customers: 41,221
Experience: Multiple jurisdictions, specialize in business/contract disputes, estate creation and administration.
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Dimitry K., Esq. and 87 other Legal Specialists are ready to help you
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Customer reply replied 5 years ago
Thank you for your help!
Lawyer: Dimitry K., Esq., Attorney replied 5 years ago
You are most welcome and good luck to you!
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Customer reply replied 5 years ago
Sorry Dimitri, one question in my original post that you didn't address...are you able to respond to that here?
"He has also mentioned just dissolving the current LLC entirely and starting over the exact same business on his own, although I believe he knows that he can't do that exactly. Or can he?"
Lawyer: Dimitry K., Esq., Attorney replied 5 years ago
Thank you for your follow-up.

Sure thing, I will be happy to address it for you.

To answer that question, while he can dissolve, he cannot re-start the same entity and cut you out--you would be entitled to the 30% of the equity and/or good will until you sign off on the new business, or frankly take it over the same date he "dissolves" it by applying to reinstate it under your own name.

Good luck.
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Customer reply replied 5 years ago
OK Good to know. Thanks very much again for your quick and thorough responses!
Lawyer: Dimitry K., Esq., Attorney replied 5 years ago
You are most welcome and good luck to you!!
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