Legal Question in Business Law in New Jersey

Re: Managing Member of LLC question

Yours is a typical situation when people try to form businesses without the appropriate legal help. Unfortunately, you do not have a written Operating Agreement. This means that the terms of your LLC agreement are "oral." It does not mean that you have NO agreement. You can not remove the other members except under agreed terms or by law. You must contact a business lawyer immediately!

There is further information on my web site http://www.businessesq.com/

I hope this helps!

Ronald J. Cappuccio, J.D., LL.M.(Tax)

Re: Managing Member of LLC question

When you made an agreement with your partners (and that is what it sounds like you have done) then you all agreed to certain terms, who is going to contribute time, money, equipment, whatever you agreed to. Now you want out of the agreement.

You need an attorney's advice NOW, before you take any action. You should have had an attorney assist when you started this, and you definitely need a lawyer to guide you now, when you wish to end it. I suggest you find a lawyer near you, who handles both business matters and lawsuits.

Please contact me if I can be of assistance; I am in northern NJ.

Re: Managing Member of LLC question

It was not clear whether you ever had any documents prepared as to each other's rights when you formed the LLC. They would govern if signed and possibly even if unsigned.

In the absence of documentation the practices and involvement in the business of each member would need to be carefully reviewed. You should contact a lawyer immediately in order to be properly advised and not make any serious mistakes.

Re: Managing Member of LLC question

I agree with both Bob and Ron, that you have gotten yourself into a fix, but one that can be corrected. How difficult it is depends upon the members you now want to get rid of and what has happened since the business has started, plus what you might have promised them, or what they may claim you promised them when the business started, as well as what was expected of them (money, services, equipment, etc.). They may have rights in the business, or they may have obligations to it. There are not enough facts given to provide a specific answer, so I will be general. Presuming they have been listed to the LLC formation papers, they are partners and you have no formal (written) agreement between yourselves. There are income tax ramifications of their being partners as well as what you might be faced with getting rid of them. If they are willing to get out peacefully (without much objection) I suggest you try to just have them sign off. You may have to pay them something to do this. I suggest this be done by December 31, so any tax returns will be for the full or partiasl year ending 12/31. You can then start fresh on 1/1/06. There are accounting matters to resolve, as well as getting them out, which is why I suggest everything be done by 12/31. If they have contributed anything to the business (hard assets like cash or equipment) this has to be dealth with. If they rendered services, commissions may be involved, and any profits/losses accounted for. Customers may need to be advised, if the other partners have direct contact with them. Additional agreements may be needed to assure they do not leave and take customers. Contact me directly as much more information is needed on what has happened and specific suggestions will depend on all the facts.