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TexLaw
TexLaw, Attorney
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Experience:  Lead trial/International commercial attorney licensed 11 yrs
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LLC member question

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Hello,


We have LLC and its been in business over one year. We did not have any operating agreement written. We are 4 member.


 


I am having a problem that one of my LLC member does not want to come to sign control agreement. We have been calling, meeting, asking, to come and sign the agreement. But, that member deliberately avoiding.


That member says I am the owner because I am listed in Article of Organization and this make me the owner and only I dictate not others.


This member initial investment was around 6k which is less than two members and 3rd member did not invest but did work in lieu of investment.


 


What should we do now? Our LLC is in MN and I think all States have pretty much same LLC rules.

Hi,

What is your question.

Thanks,
ZDN
Customer: replied 4 years ago.

We have LLC and its been in business over one year. We did not have any operating agreement written. We are 4 member.


 


 


 


I am having a problem that one of my LLC member does not want to come to sign control agreement. We have been calling, meeting, asking, to come and sign the agreement. But, that member deliberately avoiding.


 


That member says I am the owner because I am listed in Article of Organization and this make me the owner and only I dictate not others.


 


This member initial investment was around 6k which is less than two members and 3rd member did not invest but did work in lieu of investment.


 


 


 


What should we do now? Our LLC is in MN and I think all States have pretty much same LLC rules.


 


Optional Information:
Country relating to Question: United States
State (if USA): Minnesota

Are all four of you listed in the Articles of Organization as members?

Customer: replied 4 years ago.

no just one, who is refusing to sign operating agreement, does this makes that member the only owner of the company?

It makes it so that that person can claim that they are the only member of the LLC, unless there is some other documentation that shows that you have all agreed that you are members.

Are there any emails or letters wherein he agreed that you are also members of the LLC?

Do you have access to the company's records and bank account?
Customer: replied 4 years ago.

we all had oral agreement, but bank account is under different member who also shares 50% and that member says " he can testify that we all are part of company equal "

Thank you for your response.

The first issue is whether you can force one of the members to agree to an operating agreement. The answer to this is no. That member can refuse to agree to an operating agreement if they choose to.

The second issue is that the first member is denying that the rest of you are also members of the LLC. None of you are listed on the LLC articles of formation and you do not have any document in which the LLC grants you a member. Your only evidence that you have a membership interest is that you have transferred money and can all testify regarding an oral agreement that you would all be members.

In this situation, you would sue the member denying your membership for failure to transfer membership in the LLC despite your capital contributions to the LLC. You would assert the oral agreement and show that you all made payments. Then you would ask the court for an order declaring that you are members of the LLC.

Your other option would be to sue for return of the initial investment based on fraud.

However, again, as far as your initial question regarding whether you can force one member to enter into an operating agreement, the answer is no. This should have been done prior to or simultaneously with the organization of the company.

Please let me know if you have further questions on this issue.

-ZDN
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