getting out of an LLC

[mesillakid]

What is the name of your state? New Mexico

I've written before regarding this topic but have some new considerations:

1) I'm a 50% partner in an LLC owning a commercial property.
2) I've had discussions with the other partner regarding him buying me out.
3) I've owed $2,000 to the LLC since last October but due to financial constraints haven't paid it but was assured verbally by the other partner that I could pay it later.
4) As we're discussing a solution to the partnership, I receive a letter from him saying the LLC (him) met and voted me out since I had a "failure to make contributions" ( the $2,000) and he returned my capital contributions.
5) He's got the property in his name personally but we added an addendum to the LLC pledging the property to the LLC.

Any advice? Move on to the mediation/arbitration clause?

Am I up ****'s crick...is there a paddle?

Thanks!

 

[Ex Is Nuts]

As we're discussing a solution to the partnership, I receive a letter from him saying the LLC (him) met and voted me out since I had a "failure to make contributions" ( the $2,000) and he returned my capital contributions.

Do you have any form of an operating agreement? I think alot of your questions will be directly answered by your operating agreement.

More than likely, if you have a proper operating agreement, which protects the both of you, then he can't just sit in front of a mirror and have a vote, with himself only being present, about your status in the business. Get out your operating agreement, and see what it says. Hopefully you have one............ and hopefully it defines the way votes and decision making are to be handled.

Without it, you will have a fight on your hands, but I don't think he was on the "up and up" with what he did. At the same time tho, without one, he will have a heck of a fight proving what he did was within his rights under the LLC.

You need to look at the operating agreement, and have an attorney review it. I don't think your answers are going to be properly answered by anyone in here without knowing the exact verbage of that agreement....

 

[mesillakid]

Thanks Ex!
I do have an operating agreement and I will have a lawyer review it. The person pulling this deal on me is a former lawyer and simply says he has the right to do it...I don't read it that way but as in all of these agreements there seems to be some weasel room. After discussing the facts of the matter with my lawyer on Monday, he is in agreement that I have a strong case...the next steps being mediation and arbitration if necessary. Oddly enough the person I'm in odds with practices as a mediator but seems to be the last person to practice what he preaches!
Thanks for your help!

 

[Ex Is Nuts]

Well certainly, if he can pull your bluff and play you for a sucker, why not?

The way I see it, if you are a 50% partner in the LLC, then you are entitled 50% to all monies, debts, assets, profits, properties, etc., DEPENDING on how the operating agreement is set up (hopefully it was set up that way!). If it is set up properly, you are certainly entitled to more than just what you put in to the business.....

Sounds like your "partner" is just trying to screw the daylights out of you, and more than likely, your lawyer is correct.... you have a strong case... sure wish I could see your operating agreement to see how it is written.........


Good luck to you!!!!!!!!

 

[mesillakid]

Thanks Ex!
The LLC is set up as a 50/50 deal...it is a generic LLC agreement from a Nolo law book so isn't state specific or anything fancy like that. When he sent my $ back and a copy of the LLC operating agreement he not only went to the trouble of highlighting the section for why he was booting me out (which of course looks as if he's taken great liberties with it's interpretation) but also the section on the arbitration procedure...looks like he's anticipating me to go that route.
Thanks again!

 

[Ex Is Nuts]

Generic forms suck, which you are probably finding out! But yes, I am sure he is going to stretch the wording to it's furthest extent to try to screw you over!

He is probably trying to take your name off of all bank accounts, etc., etc. DON'T LET HIM! He can not do that until you have legally signed off on the business, and he will have to have LEGAL paperwork to show the bank that you are no longer a part of the business. So my suggestion..... keep going down to the bank every week and getting copies of all the transactions(and notify the bank of what he is trying to do, and that you have not "officially" been bought out of the business as of yet!)! He'll probably try to hide funds! Also, you need to get a bank statement which shows the amount in your LLC bank account(s) as of the day he gave you "the boot"! You're going to need that to get your fair share! I would also consider getting past bank statements and having a CPA or accountant scrutinize them. More than likely, he's been planning this for quite some time, and has been hiding money from you, just in case you put up a good fight. I would try to get your lawyer to have a GOOD accountant review all of the company ledgers! (you 2 didn't have one of those wonderful situations where u had 2 sets of books did you?) It would probably also be adviseable to get a copy of all of your tax records. What is going to have to happen at some point, is you are going to have to come up with a value for this business... which will have to be done by a CPA more than likely. You will need all the records to establish a worth on the business....

But if it is a 50/50 venture... then he owes you more than just your capital contributions! Let me ask you this... was the business showing a profit????? I assume it was if you were buying property....

And u are welcome for the help....

 

[mesillakid]

Hey Ex!
Thanks for the great advice...you're right on with what he's been trying to do...fortunately he sent me a card to get my name off the bank account which I am not signing and holding as a lovely memento of our LLC. He also sent back my capital contribution...the check of which I have not and will not cash. I've also been trying to get our latest K-1 from the LLC which should be finished any day. Unfortunately this hasn't been a profitable venture to date since we were still putting in $ to finish off a 2nd building for subsequent rental...then profit city...but he knows that...and what better time than to cut out a partner of potential profits?!

Thanks...you've saved me from some potential blunders! Looks like were headin' for mediation!

All the best!

 

[Ex Is Nuts]

You are most welcome! Best of luck to you. Come back and let us know how it goes!