Legal Question in Business Law in New Jersey
LLC member removal or buyout
I am 1 of three partners in a NJ LLC without a written operating agreement.
One of the members is continually undermining the business and constantly opens the LLC up to harassment cases from our employess. The other two of us (60% stake)are concerned and would like to remove him from the LLC. We are willing to try an amicable buyout but need to know what our other options are if there are any.
1 Answer from Attorneys
Re: LLC member removal or buyout
NJ corporation rules require an operating agreement. Chances are without a written agreement, your "company" will also violate other requirements of a LLC, and you are exposing yourselves to personal liability - i.e.: if the company is sued, you will be personally liable for damages.
If someon in your company is harrassing employees or otherwise acting improperly, the company (and you personally) will be subject to enhanced damages, because you know there is a problem, but you are not doing anything about it.
Do this IMMEDIATELY - have a meeting, and lay doen the law, tell the troublemaker what problems exist, and theat things must change (hopefully you know exactly what needs to be changed). If he does not comply, you and the other member vote on changes. Under the LLC default provisions, it's 2:1, and your motions prevail. If youcan not get the trouble maker to comply, you MUST file a complaint in Chancery Division, along with an Order to Show Cause on an emergent basis if time is of the essance, and drag him beforer a judge. Before the judge, you want to compell the signing of an operating agreement, and any other necessary changes, to protect the company.
If you fail to act, the company is going to fall apart ot be sued into oblivion, as it should. If you don't/can't properly manage the company, that's what ends up happening.
Take action.
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