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TexLaw, Attorney
Category: Legal
Satisfied Customers: 4430
Experience:  Lead trial/International commercial attorney licensed 11 yrs
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Have an LLC with 7 members on a 350 acre duck club. 3 members

Resolved Question:

Have an LLC with 7 members on a 350 acre duck club. 3 members have not paid dues or taxes for many years. How do we either 1_ re-coop back payment or 2) foreclose on them ?
Submitted: 5 years ago.
Category: Legal
Expert:  TexLaw replied 5 years ago.

Zachary D. Norris :


Zachary D. Norris :

Are you there?

Expert:  TexLaw replied 5 years ago.

since you weren't able to respond, I've switched us to the Q&A format. It works the same, just not as an Instant Message.

Does your LLC have an Operating Agreement? If not, do you have any documents which regulate the LLC?

Customer: replied 5 years ago.

yes i'm here.....

Yes we have an operating agreement, but no where does it have a provision for non payment.

Expert:  TexLaw replied 5 years ago.
The operating agreement should have a provision regarding default. Non-payment of assessed dues would be a material default in the agreement. Thus, if a party defaults, the operating agreement would control how to handle the default.

State law does not provide a default mechanism by which the LLC can simply take the membership interest away from a member. If there is no provision in the operating agreement which provides a procedure for default, then you have to go back to the default procedure under state law. This procedure is laid out in Chapter 8 of the Limited Liability Act of the California Corporations Code. Essentially, it calls for dissolution of the Company. You have to dissolve the company and the distribute the assets, the non-paying members would have their lack of contributions deducted (or if they owe money, then they would be assessed it by the court at that time). Then you could reform the LLC without the non-paying members.

Please let me know if you need further information. If you find my answer acceptable, please click accept so I may receive credit.

Best Regards,
Zachary D. Norris
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