partnership gone bad

[hanger99]

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

I started a member managed LLC with a partner, things started off well but after a while, problems started to arise with my partner.

At that point, I left the company and transitioned the company over to him so he is the sole manager of the manager-managed LLC and that he can continue on with the company on his own. I still have equal shares in the company. But I am not involved with anything with the company, I am just a silent share holder at this point.

I now suspect that he may be doing some illegal activities with the company. I have no evidence of course, but I do not want to take any chances and want to dissociate myself as much from the company as much as possible. I want to dump all of my shares in the company, however it is very difficult to get a hold of him to sign anything. What can I do legally to protect myself and let it be known that I do not want anything to do with this company? It feels like I am somewhat protected since it is an LLC and he is the sole manager running the business and I am just a silent partner right?
I just don't want to take any chances right now and cut all associations with him immediately. Any help is appreciated.

Thank You.

 

[quincy]

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

I started a member managed LLC with a partner, things started off well but after a while, problems started to arise with my partner.

At that point, I left the company and transitioned the company over to him so he is the sole manager of the manager-managed LLC and that he can continue on with the company on his own. I still have equal shares in the company. But I am not involved with anything with the company, I am just a silent share holder at this point.

I now suspect that he may be doing some illegal activities with the company. I have no evidence of course, but I do not want to take any chances and want to dissociate myself as much from the company as much as possible. I want to dump all of my shares in the company, however it is very difficult to get a hold of him to sign anything. What can I do legally to protect myself and let it be known that I do not want anything to do with this company? It feels like I am somewhat protected since it is an LLC and he is the sole manager running the business and I am just a silent partner right?
I just don't want to take any chances right now and cut all associations with him immediately. Any help is appreciated.

Thank You.

As a shareholder, you are usually protected from any personal liability, but you are not immune from liability. It depends on the facts.

And, if you have received any dividends derived from the illegal acts committed by the corporation, you can be held personally liable for these amounts. Any shares you hold in the corporation are vulnerable.

That said, you are free to sell your shares. Perhaps your former partner is willing to purchase them (if you can find him ).

I recommend you sit down with an attorney in your area to review all of the facts of your involvement with the corporation from its inception, and to further discuss with the attorney your suspicions about your former partner. If your former partner has not acted for the benefit of the corporation, and you can show he has committed fraud using the corporation's assets to the detriment of the shareholder (you), he could be held liable for the losses you have experienced as a result.

Again, a personal review by an attorney is necessary. Personal reviews fall outside the scope of this forum.

 

[amanjeet]

I would talk to a lawyer if I was in your situation. Although you should have some protections, there are going to be certain issues that arise in each separate case. Good luck

 

[quincy]

amanjeet, every case will depend on the particular facts presented.

Talking to an attorney is good advice to give hanger99, though. That is possibly why I recommended it earlier.