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Ask a Lawyer -- LLCs
LLC Question 163
Question:
I am a minority member of a CA LLC and provided extensive services to the LLC while others have not. They have not compensated me for the services or included my services toward capital calls as I requested. Do I have any options?
Response: The facts contained in the question do not mention an operating agreement which is the critical element in answering your question. I assume there must have been a discussion among the members prior to the start of business operations as to who would perform what services for the LLC. In a normal arrangement, either the services provided by each member are supposed to balance out or some sort of additional compensation goes to the member(s) providing more services than the rest. To my knowledge, there is nothing in the California Corporations Code requiring that an LLC member who performs services beyond that of his or her fellow members is entitled to extra compensation. Therefore, the question is whether there was an agreement among the members of your LLC to either compensate you for extra work or to provide services which they have failed to do.
Keep in mind that the member operating agreement does not have to be in writing under California law to be enforceable. See California Corporations Code § 17001(ab). Of further interest to your situation is
Code § 17201(a)(2) which provides:(2) If a member does not make the required contribution of property or services, that member is obligated, at the option of the limited liability company, to contribute cash equal to that portion of the fair market value (or agreed value if stated in writing and signed by the limited liability company and the member) of the contribution that has not been made. The foregoing option shall be in addition to, and not in lieu of, any other rights, including the right to specific performance, that the limited liability company may
have against the member under the articles of organization,
operating agreement, or applicable law. If you wish to pursue the matter further, retain local counsel to explore whether you have a cause of action for breach of an oral or written operating agreement between the members of your LLC.
Submitted: 01/19/2008; Greg, California
Response: 01/20/2008; JJR
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