Legal Question in Business Law in California

I'm a co-owner of an LLC along with two other shareholders. It's been discovered that the Manager of the LLC embezzled over several years, taking more than $250,000 in extra pay (not including using the company credit card for personal expenses). He has most likely spent every penny, so there is nothing to be gained by suing him, as he won't pay a dollar back. We shareholders would like to not only remove him as Manager, but also take back all of his membership units as remuneration for the theft. The plan would be to have a valuation done on the entity (which he's damaged by racking up massive credit debt), and then essentially buy him out by taking his units in exchange for the stolen amount of money. Is this legal in California as long as the Operating Agreement permits such action by a majority vote of members?


Asked on 7/30/16, 12:16 am

1 Answer from Attorneys
Keith E. Cooper Keith E. Cooper, Esq.

Embezzlement is a crime and you should consider reporting this to your local police. The terms of buying out a member should be spelled out in your LLC operating agreement, and it most likely has a provision for what happens if a member engages in criminal activity or steals funds.

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Answered on 8/15/16, 4:26 pm


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