Legal Question in Business Law in California

Re: forming LLC

Forming an LLC would not be a problem. The problem would arise upon transferring or attempting to transfer the business assets and operations from the existing entity, which I assume is a partnership, although you didn't say so.

If the business currently operates as a general partnership, whether eight of nine partners can transfer the business to a newly-formed LLC would depend upon the partnership agreement, and if there is none in writing, or it doesn't cover this situation, general partnership law would apply.

At that point, my guess is that eight of nine partners agreeing to terminate the partnership and transfer its assets and operations to their newly-formed LLC would be legal and proper, and that if the ninth partner didn't want to go along, the other eight would have to buy out the ninth at fair value.

However, there could be facts or conditions in the partnership agreement, written or oral, or implied terms and conditions, that would make dissolution and termination of the partnership improper, even if 8 of 9 consented. Therefore, the majority should act only upon the step-by-step advice of a business lawyer who can read all your agreements, study the facts and the law, and coach you on each step.

The most likely exception to your existing business being deemed a partnership would arise if you were just co-owners of real property, e.g. tenants in common of an apartment complex, farm, bare land held for speculation, etc. In this case, there may be no partnership to dissolve and you may need to do a partition suit to break up the ownership and cash out the recalcitrant co-owner.

Re: forming LLC

If 8 of the 9 owners form a LLC, and place the property into it, the remaining 1/9 share is still owned by the non-member.