LLC Formation and Operation

[jbarnum]

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

2 membrs in an LLC. One desires ultimate say as to the selling price of the company. How does the other protect his interest in the company (e.g. equity, receipt of profits, etc.)? In other words, if one member has 51% of the company, what would stop him from selling out and cutting out the other 49% owner?What is the name of your state (only U.S. law)?

 

[cfspartan]

All about paperwork

The articles of organization, if customized, or the operating agreement for your LLC should address this issue. There is a good faith requirement here - if your business partner sells the company, you are legally entitled to your 49% of the sale. I am not an attorney, but in my previous business relationships, I have made it a requirement that if a member is to sell their interest, the other member must be given the opportunity to meet the offer price and buy out the selling partner. Also, you can make 51% of profits go to your partner yet all material management decisions (distributions, purchases, investments, etc. over a certain amount) must be mutually agreed to in the form of a company meeting or similar written notice (an email could suffice).

Keep in mind that if your partner has ultimate say in selling price of the company and there is not a strong operating agreement, your business partner could say that he wants to buy the company for a nominal amount and you would be forced to acquiesce. Hopefully, you aren't in business with the same types of scoundrels with whom I've been in business.