I have an LLC with my sister. Unfortunately she just dropped out and is doing nothing for the business. She had way to many personal problems and couldn't contribute which I did not foresee. Anyhow, I have 100% owner ship of capital and 100% profits. We made an agreement that the only way she was going to earn her share of profits is until the business pays me back all that I invested. She would also earn her way in with her time she puts in for free. Well I am still in the beginning stage and have earned nothing in revenue. She has disappeared and has pretty much made it apparent that she will not be part of this venture any longer. She has done nothing really to put towards the business. I was hoping she would when we get customers but like I said we haven't gotten there yet. But I do have this LLC with her name on the books as my partner. So what do I do to ensure that she gets off the books so it doesn't come back to haunt me when I am successful and make profit?
Answers:
You need to talk to a lawyer. Most states have abandonment laws saying if the partner leaves and is gone a certain period of time they have esentially walked away and can be removed. Did you do a distribution of shares and file it with the state? If you did not the process should be really easy.
Well, the question is whether you really do have 100% ownership. If you do you should have no problems. Each LLC management agreement is like an addenda and (should so say) supersedes any prior agreement. The agreement that "she would earn her share of profits even if you are fully paid out worries me. That doesn't sound like you own 100%. An LLC is a corporation and ownership is key to outcomes. If you have an agreement giving her ownership based on performance, your 100% ownership is contingent because you have essentially granted her an option on ownership.
I can't tell you, based on the data provided, how safe you are. I suggest you spend a bit on a lawyer and find out where you are and how to move forward. Sunset timing on any agreements is really important. If she doesn't perform by X date it is over. Long or worse unspecified "tails" is nothing but an invitation to legal problems.
Good luck!
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