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We have an LLC. Three partners. Once has 51%, the other 2…

We have an LLC...

We have an LLC. Three partners. Once has 51%, the other 2 have 49% combined. It came to light recently that the 51% owner (who never works anyway) has been stealing massive amounts of money. We have proof of his spending on things such as lavish vacations and remodeling his home. According to our partnership agreement each partner gets 1 vote. Can we fire him as an employee? He will never sell his shares for a reasonable amount. We just need him out of the office and off the payroll.

Accountant's Assistant: Can you tell me what state the LLC is registered in?

PA

Accountant's Assistant: Has anything been filed or reported?

Not yet. We could report it to the IRS too?

Accountant's Assistant: Anything else you want the lawyer to know before I connect you?

Nope. We don't need him, he is dead weight.

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Answered in 5 minutes by:
3/7/2018
Richard
Richard, Tax Attorney
Category: Tax
Satisfied Customers: 56,560
Experience: 29 years of experience as a tax, real estate, and business attorney.
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Good morning. You have all kinds of leverage with him to fire him and/or to purchase his interest. Being a 51% owner does not make the company funds his personal piggy bank. You have recourse both from a criminal side and the civil side. On the criminal side, you can prosecute him for embezzlement, fraud, and theft. On this front you would want to contact the district attorney's office as the district attorney's office is where criminal prosecutions are pursued.

On the civil side, you have a cause of action for fraud, misappropriation of company assets, breach of fiduciary duty, breach of contract, as well as several other causes of action. The fraud and misappropriation causes of action will entitle you not only to your actual damages, but punitive damages as well.

To be honest with you, your best alternative here is to pursue this from the civil side. Goint this route, you would want to present him with the foregoing information and your findings and demand he resign and sell his shares in the company to you at a price agreeable to you, given all he's taken fraudulently (49% of every dollar taken for personal use has been stolen from the 49% members). A criminal prosecution requires you to prove intent to not pay you from the beginning and a much higher burden of proof..."beyond a reasonable doubt" versus simply "preponderance of the evidence" on the civil side. And, even if you could get a prosecutor to pursue this, you would then find him likely spending any money he has to defend himself rather than paying you.

But, I would send him a letter by certified mail informing him of the foregoing, making your demands and demanding compliance within a short specified period of time or you will have no choice but to pursue this from both the criminal and civil side. That should provide plenty of incentive to comply with your demands; but, if it does not, file your suit and/or contact the district attorney's office. . Even if you have to pursue this further to a suit and/or prosecution, that's likely all you will need do. In my experience, he will settle this quickly thereafter rather than risk punitive damages and criminal prosecution.

Thank you so much for allowing me to help you with your question. I have done my best to provide information which fully addresses your question. If you have any follow up questions, please ask! If I have fully answered your question(s) to your satisfaction, I would appreciate you rating my service as Good or Excellent (i.e., 4 or 5 stars)(hopefully Excellent/5 stars!). Otherwise, I receive no credit for assisting you today. I thank you in advance for taking the time to provide me a positive rating!

Richard
Richard, Tax Attorney
Category: Tax
Satisfied Customers: 56,560
Experience: 29 years of experience as a tax, real estate, and business attorney.
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Customer reply replied 1 month ago
You have told me what I was hoping to hear. We really don't want to go the criminal route but it is leverage. The only hard part is my partner is an attorney (makes him think he is smarter than us). I think we will be meeting with our attorney shortly. Also, thanks for the note on the 49% theft. He can steal his share. Much appreciated.

You're very welcome! It's been my honor and privilege to help you with this. If I can help you in any way in the future, I'll be happy to help. For easy access, my bookmark is: www.justanswer.com/law/expert-legalbeacon/ . Or, simply request “Richard only” in the first line of your question.

Thank you so much for the 5-star rating! I know rating takes an additional step and I truly appreciate you taking the extra time!

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