Legal Question in Business Law in Georgia

LLC Ownership Fiasco

Formed an LLC last year, 3 members. 2 invested $, last one was % for services. Operating agreement never drafted with ownership structure because immediately members 1 & 2 wanted 3rd member to invest $ for %. Weekly negotiations for 5 months regarding alternatives of how this could be done with all 3 members. Due to employment issues (poor work quality, abuse of co. credit card) 3rd member was term'd. Paid salary in full for all services rendered. No ownership % ever agreed upon nor drafted in any form. Now company is being sued by 3rd member for 25% distribution of profit and for co. to buy 25% ownership interest. To date, no dist. have been made. Through 3rd member's employment company had net loss. What do the initial verbal discussions of ownership commit company to?

If Operating Agreement was never drafted to state ownership due to ''ongoing negotiations'', what is the law regarding ownership? There are no names on the Articles or any other documents. If we decide to make an offer to make this go away, how would we determine?


Asked on 3/18/04, 1:43 pm

1 Answer from Attorneys
Jeff Kent Kent & Merritt, P.A.

Re: LLC Ownership Fiasco

I hate to give so little information by way of response, but it really depends on what was entailed with the oral discussions and any writings you might have. Depending on the nature of the oral discussions coupled with what this third "member" actually did, he may or may not have an ownership claim.

From your post, it appears that he has filed suit. You need to get with an attorney ASAP and ensure that you do not go into default. The attorney will be able to get into more detail about what was said, the work performed by the respective parties, the nature of the failure to perform as required, abuse of credit cards, etc. From that information, you might get an opinion as to how to best resolve the situation.

Good luck.

The foregoing is general information only, not specific legal advice. Consult with an attorney of your choosing before taking legal action.

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Answered on 3/18/04, 4:09 pm


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