Legal Question in Business Law in California

Re: LLC ownership

I agree with both of the preceding answers, which say essentially the same thing. There is NO impact - unless the cessation of work for the LLC violates some contract between the member and the LLC.

Re: LLC ownership

Oh - one other thing I should perhaps have said:

There is NO impact unless the cessation of work violates a contract between the member and the LLC and/or the other members - AND if it does violate such a contract, the impact is that the contract is breached and the LLC and/or its other members may have a right to sue for breach of contract, and the legal effect of the breach, and therefore the nature and extent of the remedy, would be determined by the provisions of such contract. If the contract calls for his expulsion, that may be the impact; similarly, if the contract calls for a slap on the wrist, that'll be the maximum extent of the impact. Whether there is any contract with an applicable provision may depend upon how carefully the deal was thought through and documented when the LLC was formed. Many LLCs are put together slapdash, without much lawyer input, and their operating agreements tend to omit important stuff like what happens when good 'ol Joe loses interest and stops making the expected effort.

Re: LLC ownership

There is no requirement under California law for any member of an LLC to "work" for the company. There may, however, be such a requirement under the Articles of Organization or Operating Agreement for that LLC. If the Articles or Operating Agreement provide for termination of membership interest in the case where the member "discontinues working", that member is usually entitled, under the law, to demand and receive the economic interest they have in the LLC at that time.

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Re: LLC ownership

Disclaimer: the materials provided below are informational and should not be relied upon as legal advice.

Generally, membership of an LLC and its operation are not connected to each other. Some exceptions exist, for example where an operating agreement requires a member to continue performing services, or other scenarios where a person earns membership interest based on performing certain services. You should consult your own attorney to protect your legal rights.