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Ask a Lawyer -- LLCs
LLC Question 128
Question:
I am involved in an LLC based in Ohio. There are 3 members and I have the least amount of equity @ 16%. I am the only "employee" of the members. I resigned my "employment" to take a job elsewhere. Now the remaining two members want to hold me responsible for a decrease in business revenue. They have threatened legal action for damage to the company. What is the normal withdrawing process if the remaing two members want to continue the businss? Am I responsible for any negative equity when I leave the business?
Response: Let's break the question up. First issue, are you an employee / member of the LLC required to work for the LLC to retain your membership interest? This would only be the case if the LLC's operating agreement stated that you were required to be an employee of the LLC in order to retain your membership interest.
Next issue: are you competing with the LLC? It is one thing to go into an unrelated field and another to go into direct competition with an LLC of which you are still a member. I discussed this issue under Texas law in this prior post. I do not recommend competing with an LLC of which you are still a member. That could be a violations of fiduciary duties owed to your fellow LLC members. I have not researched this issue under Ohio. The contents of the LLC operating agreement, if there is one, also can bear on the issue. Best course would be to consult with a local attorney quickly.
Submitted: 09/04/2007; Jim, Ohio
Response: 09/06/2007; JJR
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