Dealing With LLC Members Who Disagree, or Who Aren’t Pulling Their Weight

In an LLC you may have a number of managing members or managers, and whenever you have a business structure with multiple chiefs, there is always the chance of dispute or conflict. Even if there isn’t a dispute over a particular issue, sometimes there is the feeling that a manager just isn’t carrying his or her weight or doing what is expected of the manager pursuant to the LLC’s operating agreement.

If there is such a conflict, there needs to be a way to resolve the dispute. How does that happen in an LLC?

Look at the Operating Agreement

The first step is the most obvious one: look to see what the operating agreement says. Most operating agreements will address how to resolve tie votes or disputes between managers. Not as many will address what to do when a manager simply isn’t pulling his or her weight, or doing what the LLC needs from the manager (although your operating agreement should address this possibility).

Your operating agreement shouldn’t only say how a dispute is resolved, but what kind of events trigger the provisions of the operating agreement that deal with breaking ties or disputes between managers.

Default to Florida Law

If you have no operating agreement, or you have one that doesn’t address dealing with the situation you are in, the law will default to whatever Florida statutes say about LLCs.

Under Florida’s LLC laws, you can just dissolve the LLC—but you would need all the members’ agreement to take that drastic step.

Unfortunately, Florida statutes only say that you can get rid of a member without court action, if the member is doing something illegal, or making it illegal for the LLC to continue, and with agreement of all members. This doesn’t help in a situation where a member simply isn’t doing work expected of him or her.

Going to Court

If court action is necessary, you could face the possibility of a court ordered dissolution of the company. The court does have the option of judicial expulsion of the member who is making it impossible for the LLC to do business.

When it comes to members who just aren’t doing work that is expected of them, that does not eliminate their title or position with the LLC. It may allow other members to fire that member if the non performing member holds an actual office—president, secretary, treasurer, etc.—and thus, end any salary the member is collecting because of that position.

But that doesn’t eliminate the member’s position as a member or manager with the LLC. Even if the court expels the non performing member, which it can do if the member is violating a term of the LLC’s operating agreement, the financial benefits of being a member, will not be terminated by the expulsion.

Problems with your LLC? Call the West Palm Beach business litigation lawyers at Pike & Lustig today.

Sources:

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

linkedin.com/pulse/been-caught-stealing-expelling-kicking-out-members-from-jimerson