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Ask a Lawyer -- LLCs
LLC Question 166
Question:
I am currently a 37.5% owner of an LLC and my partner (owning 37.5% wants to dissolve the company. He is not willing to allow me to buy him out and we have no operating agreement. For the last month, he has not been performing his duties to this company, as he has been researching how to open his own, thus placing our company at risk by not following through on commitments. The third partner owns 25% of the company on paper, but does not associate in day to day dealings. Would the both of us be able to create a majority, and expell the lazy member from the company?
Thanks, Michelle
Response: Sorry to be the bearer of bad news. Failure to have an operating agreement in place before commencing business operation is a significant mistake. To my knowledge, there is no mechanism to involuntarily remove a member from a Nevada LLC absent provisions for removal in an operating agreement. In most states, an oral agreement among the members as to what services each is to perform can constitute an oral operating agreement, however, in Nevada, operating agreements must be written. NRS 86.101. The only avenue of attack that comes to mind against the "lazy member" is his current actions to set up a competing business. Has he violated a fiduciary duty of loyalty all members of an LLC owe to each other? The Nevada LLC Act does not discuss fiduciary duties of members, therefore, if they exist in Nevada, these member duties would be found in the common law. Please consult with a Nevada attorney experienced in corporate law for advice on this topic.
Submitted: 01/29/2008; michelle, nevada
Response: 01/30/2008; JJR
User Comments
From: michelle
State:nv
Posted: 01/31/2008
Subject: Removing a Member from LLC
Comment: Hi,
In a NV LLC, we have a 50% member that doesn't want to continue with the business. He wants to close the doors. The other 50% member doesn't want to close the doors - he wants to continue the business without the other member. The annual list of members at this time needs to be filed. What needs to be done in order to correctly take the parting member's name off the list when he does not want the company to remain open?
Thanks, Michelle
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