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Ask a Lawyer -- LLCs
LLC Question 154
Question:
Hello,
My wife and I each hold 1/6 of a six member manager-managed LLC in Florida. All six members are managing members and have contributed an equal amount of cash to the company. The LLC was formed in 2005 to purchase a neighborhood property that was being sold at a Palm Beach County foreclosure sale. The operating agreement is very generic and does not detail any type of exit clause. The business purpose is defined as real estate rental. We are at a point of disagreement as to the long-term strategy of the company. My wife and I would like to sell the property or at least our shares and get out of the LLC, but we are in the minority. Our partners want to put money into two derelict houses that sit on the lot. We have substantial real estate experience and feel that this would be wasted money. The houses add no value to the property, the value is in the land itself. My question is twofold; if our partners aren't interested in purchasing our shares, is there any way we can get out of the LLC without losing our financial interest, (which is substantial?) Part two) We think that one of the partners may be trying to buy the shares of the others in order to gain control of the LLC and have final say on all matters. My feeling is that he wants to keep us as partners because we have deeper pockets than the others, but he wants majority share so he can force us to keep dumping money into the property. If we do wind up in this situation, can we be forced to continue spending money on this property?
Response: Can you withdraw from the LLC without the consent of the other members? No, not unless such a right is contained in your LLC operating agreement. See Florida Stat. § 608.427.
Can you be forced to make additional capital contributions to the LLC? I think not unless this is clearly spelled out in the LLC operating agreement. "A promise by a member to contribute to the limited liability company is not enforceable unless it is set out in writing signed by the member." See Florida Stat. § 608.4211(2). Maybe a local attorney has a different thought on the subject but that is my read of the Florida statute on LLC member contributions.
Moral of the story: Don't enter an LLC as a minority owner without an exit strategy written into a signed operating agreement for the eventuality of things going south either in the business or relationship between the members.
Submitted: 12/18/2007; Don, Florida
Response: 12/20/2007; JJR
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