How to Remove a Dishonest LLC Member
Some conflict among business partners, including among members of a limited liability company (LLC) is normal. What happens when one of the members engages in misconduct so severe that he loses that trust of the other members and they no longer want to work with him? In other words, what do you do when one of the members of the LLC defrauds the others or steals money from the LLC? It is possible to kick someone out of an LLC, but there is not a one-size-fits all way to get a troublesome member out of your company. This is because, to an extent, LLCs can make their own rules. Even when they don’t write their own provisions about how to remove a member because of misconduct, the other members have several legal options. A Birmingham business law attorney can help you get a rogue LLC member out of your LLC in a way that complies with the law and protects your legal rights.
You Can’t Just Fire an LLC Member
Each LLC writes its own articles of organization before it opens for business, so the way to get someone out of an LLC varies from one company to another. If your articles of organization do not specify how to get a troublesome member out of the company, the rules that apply are those in the default provisions for LLCs. These rules say that LLC members cannot vote a member out without that member’s consent.
The Optimistic Way
Sometimes being honest and upfront with people really does work wonders, even if those people have been honest with you. One option is to confront the rogue member of the LLC. They may own up to their actions and return the money, or they may offer to withdraw from the LLC. Once they know they are caught, it is a good time to tell them that you want them out of the LLC. You can ask them to write a request to withdraw from the LLC. You can even offer to buy them out, if you are especially generous.
The Wise Way
You can avoid this dilemma altogether if, before you start the LLC, you include a clause in its articles of organization about how and in what circumstances it is possible to vote a member out of the LLC. Then, if one LLC member steals or otherwise misuses company money, you apply your own rules. They are legally enforceable if they are written in your LLC’s articles of organization.
If All Else Fails
If you can’t vote the thief out, and if you can’t buy them out, you might have to dissolve the LLC. The only other option would be to sue the rogue member. In either case, you will need the help of an Alabama business law attorney.
Let Us Help You Today
Every LLC is unique, and a business lawyer can help you decide how your LLC can best deal with misconduct by one of its members. Contact the Alabama business litigation & corporate law attorneys at Cloud Willis & Ellis for a consultation.