Legal Question in Real Estate Law in California

Re: Mismanaged LLC Partnership

You can sue the general partner[s] for mismanagement and damages, and can replace the partners, if you have adequate legal basis for doing so. Feel free to contact me for the legal help you'll need.

Re: Mismanaged LLC Partnership

Answering your question properly and usefully depends upon sorting out some terminology. Is the organization an LLC or a general partnership, or possibly even a limited partnership? Your potential personal liability and the proper legal approach will differ between the two (or three).

I think it's more likely you are invested in an LLC, since you use that term and it is generally used specifically, whereas co-owners of businesses that aren't partnerships often refer to them selves as "partners" even though they are not.

Then, if the business is indeed an LLC, you may fall into one or more of three categories. LLCs have (1)managers, (2) members, and (3) owners of economic interests that are neither managers or members. A person can be a manager without being a member, and vice-versa. Most likely you are members but not managers, but anything is possible.

The rights of a member, or for that matter a non-member interest holder, are determined by the Operating Agreement (OA) and the statutes governing LLCs. An OA fills about the same role for an LLC that bylaws do for a corporation, but OAs typically are more creative, specialized and often more far-reaching than bylaws, which tend to be boilerplate.

In order to give you sound advice other than "you can sue, call me," a lawyer would want to know that we are dealing with an LLC, whether you are managers or members, the contents of the OA, the type of mismanagement you fear, and a brief history of events giving rise to your concerns.

I can say, however, that LLCs are a giant step more personal-liability-proof than general partnerships. Also, a lot of the liability concerns remaining in an LLC can be addressed by insurance - but not all!

I would expect the OA of a real-estate LLC to require the managers to keep its properties insured against casualty losses and public liability. The members should be named as additional insureds.