Legal Question in Business Law in New Jersey

i recently entered into a partnershp with two other members. We are a NJ LLC with no written opoerating agreement. The so called Managing Member is an attorney. We do not get along and the business(Franchise Restaurant) has problems and is losing money. I have many issues to discuss and will need counsel soon. First is this. The So called Managing Member sent an email today telling me and the third partner we will bet getting our K-1's in late March but we should be prepared to see the LLC show a $240,000 loss. What are my rights toward input of what the loss is, depreciation and all tax matters. Is he allowed to act as Managing Member and Tax Matter partner and why can he just appoint himself both? Please advise


Asked on 12/29/10, 7:24 pm

5 Answers from Attorneys

John Corbett Corbett Law Firm LLC

Absent an operating agreement, a NJ LLC is managed by its members in proportion to their company interests. See NJSA 42:2B-27. If there is no operating agreement, there is no "managing member" and each member has the right and obligation to participate in the management of the company to the extent of his percentage interest.

See also: http://info.corbettlaw.net/lawguru.htm

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Answered on 1/04/11, 5:53 am
Barry Gartenberg Barry F. Gartenberg LLC

Thank you for your LawGuru question. As noted above, absent an operating agreement, an LLC is "member managed"--- each member having a right to management. So, depending on the value of the contributions you and your other member have made to the LLC, the two of you may be able to "out vote" the "managing member." Your situation requires close review and analysis by an attorney. Please feel free to contact me ASAP so that we may explore your options and protect your legal rights. 973-921-0600. Also, my website has articles about LLCs and operating agreements. I welcome you to visit it: wwww.bgartenberg.com

Kindly note and remember that my response is merely a general comment on the law related to your question, and NOT legal advice or opinion. Also, your question and my response does NOT create an attorney-client relationship between us. You cannot rely upon what I have written, because I do not have all of the information that I need to advise you or render an opinion. Even simple facts you have not shared can completely change my answer. For me to give you legal advice or opinion, you would need to hire me to be your lawyer, and then we would need to discuss this in detail and go over the documents.

With best wishes,

Barry F. Gartenberg, Esq.

Please visit my website!

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Answered on 1/04/11, 6:29 am
Kevin B. Murphy Franchise Foundations, APC

As a Franchise Attorney I add the following. If you or the other members were clients of the attorney, there may be significant ethical violations on his or her part. Normally various disclosures approved by the bar association are required before an attorney can enter into a business relationship with a client. Your local bar association is a good contact for getting information about this issue. Regarding the franchise restaurant, if you were not given all the proper disclosures in the franchise company's FDD Franchise Disclosure Document, you may have recourse against the franchisor. Consult with a good business attorney on the LLC matter. Consult with a franchise attorney for specific advice on the restaurant franchise.

Mr. Franchise - Kevin B. Murphy, B.S., M.B.A., J.D.

Franchise Foundations, a Professional Corporation

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Answered on 1/04/11, 6:53 am
Robert Davies The Davies Law Firm, P.A.

I agree with what the attorneys have said. You need a good local attorney to represent you in this. A loss of $240,000? That is a huge loss, and it means that he is saying you will get nothing out of the business. You should not just take his word for it, you need to know what is going on. If he will not let you see the company's books and records, you can get help from the Court. Since he is an attorney, he should already know that he can not just take over and force you to agree to whatever he wants.

Give me a call, make an appointment to come see me, and let's get moving on this for you.

Robert Davies, Esq. 201-820-3460

Please keep in mind that my response is just a general comment on your question, and not legal advice. Your question and any response does NOT create an attorney-client relationship between you and this law firm. The exact details of your situation and things that you have not mentioned in your question can completely change the response I gave. You can not rely upon what I have written, because I do not have all of the information that I need to advise you, I only have the very small amount of information that you put into your question. To get legal advice that you can rely on and use, please contact me directly. I would be happy to assist you.

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Answered on 1/04/11, 7:27 am
Amy Klauber Klauber & Klauber, LLP

I don't have anything to add to what the other attorneys have previously stated. It is clear that you do need an attorney on your side. Please contact my office at 732-663-1500 to schedule an appointment where we can discuss this issue in greater detail.

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Answered on 1/08/11, 8:15 am


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