Dissolving ownership in a LLC

What is the name of your state (only U.S. law)? Utah
I am currently one of four members in a LLC (treated as a S-corp for tax purposes), each of us has 25% ownership. The owners are two married couples, so my husband is also an owner with 25%. We are tired of the practices of the other couple and would like to dissolve our business relationship. The business is a cash business, owns some valuable equipment, but does have some liabilities. How can we go our separate ways? We have two business locations, and ideally they would take over one location, but the location I operate out of primarily is the real money maker, and don't think they would go for that deal. Also, can we force them to buy us out?

You cannot force them to buy you out. You have to come to an agreement with the other couple regarding ownership rights. If the membership agreement has some process for deciding things in the LLC, any actions taken regarding the LLC must follow the process.

Thank you for your advice. The downside is that we all came together to start the business and sadly never set and rules in place. Unfortunately, we have very different views of how things should be ran and splitting is inevitable, however each of us has invested a significant amount of money. Any additional advice?

Nicoletab said:

Thank you for your advice. The downside is that we all came together to start the business and sadly never set and rules in place. Unfortunately, we have very different views of how things should be ran and splitting is inevitable, however each of us has invested a significant amount of money. Any additional advice?

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Unfortunately there are only two options:

1) One couple buys the other couple out...

2) You liquidate the business entirely and go your separate ways.

There is a third option, but you already indicated that they likely would not be receptive to that option, and that would be that you split the two locations, with maybe you and your husband sweetening the deal with some cash.

Your best bet is to approach the other couple and try to work out a fair dissolution. I would recommend you both agree upon one business valuation consultant who will come in and value the business, taking into account the equipment and separate revenue-generating locations and the liabilities. Then they will give you a report indicating the value of each item of the business. If you want to hang on to the more valuable location, then you will have to give up something else. You can sell some assets to pay off the liabilities before dissolution, or each of you can take equal liabilities.

It's never breaking ties with a business partner so have patience. Good luck!

Thank you!