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Partner is taking money out of business to go gambling

Customer Question
Partner is taking money...

Partner is taking money out of business to go gambling ($10k+) how can I remove him from our business?

Lawyer's Assistant: What state are you in? It matters because laws vary by location.

Tx

Lawyer's Assistant: What steps have you taken so far?

We have LLC and 4 total partners

Submitted: 3 months ago.Category: Legal
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Answered in 1 hour by:
3/29/2018
Lawyer: Attorney Wendy, Lawyer replied 3 months ago
Attorney Wendy
Category: Legal
Satisfied Customers: 1,198
Experience: Member at Keefer & Keefer LLC
Verified

Hello. My name is ***** ***** I am an attorney. I can only imagine how frustrating this situation must be. LLC structure has many positive attributes, but one of the things that can be problematic is removing a member. The Texas Business Organizations Code expressly prohibits the withdrawal or expulsion of a member (§101.107). That said, members generally owe to one another and to the company fiduciary duties of loyalty and good faith. Obviously, using company funds for gambling is a breach of these duties. So, one option is to demand, as a member, that the company take some action to recover these funds from that member. You would be proceeding under the law's provision for what are known as "derivative actions," which would require a written demand to collect these funds and providing specific facts to support the demand. The company - which is just you 4 - then has 90 days to decide if it will handle this issue and if it does not, then on the 91st day you could file a lawsuit. This approach can get long, tedious, messy and expensive. So, another action would be to meet with the members and ask the member using these funds to agree to sell his membership interest in equal parts to you three for a minimal sum or in exchange for the funds he has already taken, though it would be preferable to have him pay those funds back. It may be worth speaking with a local attorney to make sure all your options are fully flushed out and that whatever you and/or the other members decide is done correctly such that this one member cannot use any errors to remain in the company and to continue creating this problem.

Again, I am sorry you are dealing with this situation. I hope this information helps. If you need further assistance, please reply to this email. If I answered your question and provided excellent service, I would greatly appreciate your 5 star rating at this time.

Please note: This information is for educational purposes only and is not legal advice. No course of action is being proposed and no attorney-client relationship or privilege has been formed as a result of this conversation.

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Lawyer: Attorney Wendy, Lawyer replied 3 months ago

I wanted to check back in to see if there was anything else with which I could help you regarding this issue.

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