What Happens When LLC Owners Don’t Do Their Job?

In many ways, any kind of business is like a team. This is especially true with smaller or moderately sized businesses, including LLCs.

In many LLCs, owners or managers of the company aren’t just passive investors, or shareholders who bought shares and who sit back to collect dividends. In many LLCs, the managers or owners are also people the other LLC members rely upon to perform a function vital to the operation and success of the LLC.

Not Doing the Job

But it often happens that someone in an LLC, isn’t doing the job that you intended him or her to be doing. Maybe they aren’t as motivated as everybody else, or maybe they have moved on, mentally, to other business ventures.

Whatever the reason, you now have a manager or owner who isn’t doing the job that you had envisioned him or her doing from the outset.

Employee or Owner?

Remember to separate the role of manager or owner, from the role of employee—many members of an LLC, are both, and get paid as both.

Removing someone from an employment position, may not necessarily legally remove them as an owner or manager, a position often acquired by virtue of an initial investment, or of the original corporate documents that may name that person as an owner or manager.

Practically, unless you remove the owner or member, as an owner or member, this can result in an expelled member still getting whatever dividends or financial payments that come with the status of ownership interest in the LLC.

Management or Operating Agreement

You can remove a manager from an LLC, but it isn’t easy.

The first step is to look at your government documents, specifically, the operating agreement of the LLC.

You are looking for two things. The first is, what events or conditions or circumstances properly authorize the LLC to remove the manager, and have those events been met.

Assuming that they have, the next thing to look for is how, procedurally, to remove the manager.

Properly and thoroughly drafted operating agreements will spell out the process for removing an LLC manager-if they do, the obvious step is to follow the procedures set forth in that agreement. Other management agreements which may have been hastily drawn up, may not address the issue.

Going to Court

Absent something in the management agreement that addresses the problem, you may be left with having to go to court if you cannot work something out with the nonperforming owner.

A court does have the option of getting rid of the non performing member—but a court could also just dissolve your LLC. This often happens when the expelled manager countersues, and alleges fraud, or other activities by the LLC, which, if the court believes those claims, could persuade the court to just end the LLC altogether.

Let us help your LLC with its day to day legal issues. Call our Fort Lauderdale business and commercial litigation lawyers at Sweeney Law P.A. at 954-440-3993 for help.

Source:

leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0600-0699/0605/Sections/0605.0602.html