Tattoo Troubles in NJ - Need your help/advice

[TattooTroubles]

What is the name of your state (only U.S. law)? NJ

My partner and I are 2/3 owners, with our 3rd partner (we'll call him John) owning the other 3rd. Our business is a small Tattoo Studio, which is an LLC. We are both female working artists with 20 years experience and considered by the County Health Dept. to be operators because of our experience in the industry. John has been tattooing for 6 months and is considered to be an apprentice. I think he expected to be considered a working artist immediately because he is an owner, but the Health Dept. bases it on experience. His resistance to the situation has resulted in tension and misplaced aggression toward us. He is now threatening to sabotage our business. For the past few months, he has refused to lift a finger as far as running the business, and is chasing customers away out of spite. Yesterday, he verbally attacked us both, and acted like he was going to cause us physical harm, with other artists and customers present. He goes on and off his medication for anger issues, and when we started the business he made a verbal agreement that he will remain on his medication at all times. In our partnership agreement, it says that no one shall engage in any behavior that will effect the business in a negative way, and frankly we are scared he is going to hurt someone and/or ruin our reputation. We have tried to work things out with him repeatedly in the past, but we are met with anger and bullying behavior. He says that since he is a part owner, he can do whatever he wants to whomever he wants. At this point, we don't see any hope of keeping this partnership intact. We are not sure of our rights, and what actions we should take to protect ourselves and our business. Thank you for your time.

 

[justalayman]

so, go find a lawyer that can tell you what it will take to dissolve the partnership.

You need to realize that as owners of the business, you have a lot of liability for Johns actions when he is acting as an employee or owner of the business. In the end, there may be no salvation of the business as it is. That is something you will have to explore with the lawyer. Not knowing how your partnership is structured and how the business and especially the business license is attached to the partnership, it may not be possible to force a separation of John from the partnership without shutting down everything and starting new without John.

 

[Proserpina]

so, go find a lawyer that can tell you what it will take to dissolve the partnership.

You need to realize that as owners of the business, you have a lot of liability for Johns actions when he is acting as an employee or owner of the business. In the end, there may be no salvation of the business as it is. That is something you will have to explore with the lawyer. Not knowing how your partnership is structured and how the business and especially the business license is attached to the partnership, it may not be possible to force a separation of John from the partnership without shutting down everything and starting new without John.

Agreed.

If anyone else is interested, they can take a look here: http://www.state.nj.us/health/eoh/phss/bodyart.pdf

(Chapter 7 - and you've gotta love a government document with spelling errors )

 

[TattooTroubles]

Additional Info

Thank you so much for your replies. As far as dissolving the partnership, wouldn't this be something John would have to agree to? Or would it be "majority rules"?

It's hard to believe the spelling errors in the Body Art Code of NJ, which I've definitely come across on multiple occasions while reviewing the strict standards we are held to. You shouldn't have to follow laws that are misspelled!

Also, here is some additional information:
The only semi-relevant (but not really) information in our partnership agreement seems to be the following:
"Termination of Partnership: The partnership may be terminated by a unanimous voted agreement of the partners. Written notice of the meeting where termination of the partnership is to be considered shall include a specific reference to this matter. Written notice of the decision to terminate the partnership shall be given to all the partners. Payment shall than be made of liabilities of the partnership and a final distribution of the remaining assets, either in cash or in kind, shall promptly be made to the partners or their personal representatives in proportion to each partner’s percentage of the partnership.
Voluntary Withdrawal (Partial or full) of a Partner: Any partner may withdraw from the partnership and the partnership shall continue as a taxable entity. The partner withdrawing from the partnership shall give notice of such intention, in writing, 60 days prior to exiting the partnership. Written notice shall be deemed to be received as of the first meeting of the partnership at which it is presented. If written notice is received between meetings it will be treated as received at the first following meeting. In making payment, the value of the partnership as set forth in the quarterly income evaluation statement prepared for the first meeting following said written notice was received from a partner requesting a partial or full withdrawal, will be used to determine the value of the partners capital account.
The partnership shall pay the partner who is withdrawing from the partnership his or her share of any equity in the business, 33.333% of that year's earnings, to said point of dissolution of the partnership."

Also, in our partnership agreement it says:

"Forbidden Acts:
No partner shall:
...
5) Commit any actions deemed inappropriate or unlawful on the property of the established business, in the businesses name or as a representative of the business.
6) Do any act detrimental to the interests of the partnership or which would make it impossible to carry on the purpose of the partnership. "

"Inappropriate" and "detrimental" acts were definitely committed, however, these seem like fairly broad terms, so we are not sure as to how well this would hold up in court?

Also, we do not have an operating agreement, and, unfortunately, our partnership agreement does not address the issue of ousting, removing, or buying out a partner. This is our first business and we did not realize the importance of laying all of this out in an operating agreement until now! We are wondering what NJ Law for LLC's states in regards to this matter, since we have no agreement. I cannot seem to find the "New Jersey Limited Liability Company Act,” only the Revised version which, according to my research, doesn't go into effect until March of 2014 if your LLC was formed before March of 2013, which ours was.

Thank you again for your time. Any advice is greatly appreciated.

 

[Dave1952]

It's difficult to give advice based on quotes out of a larger document. You really should speak with a lawyer about this. From your description it seems unlikely that John will agree to dissolving the business but it seems that you can achieve a similar result by handing in your withdrawal notice. Once again talk to a lawyer. I'd discuss this with the other operator. That person may also wish to withdraw and seek other work.

 

[OHRoadwarrior]

If your agreement does not allow 2 of you to elect to dissolve, it does give you both the right to withdraw. Presumably he would be in serious trouble if that happened.