Legal Question in Business Law in Ohio

Hello, I started a Ohio LLC with 2 partners. 1 partner resigned instead of taking role and responsibility concessions. We have filed a articles of organization in Ohio, we have also drafted operational agreement that has not ever be signed.

We have been functioning as 33% equity partners. However our operational agreement has him with 50% with me having 50% while our third partner clears up a legal issue. As a partner he agreed to bring $10k in without anybody signing a thing.

Our lawyer, his contact drafted the operational agreement and filed us with the state. Can we dilute his equity to nothing and how can we take full ownership of the company name? Anything else I might be missing?

Thank you in advance...

Asked on 10/11/11, 3:07 pm

1 Answer from Attorneys

Bradley Miller Miller Law LLC

The answer to your question is maybe and the lawyer favorite "it depends."

If a written operating agreement was not signed, then it is generally not enforceable. Oral operating agreements can be enforceable in Ohio if the facts indicate there was an oral agreement. If there is no operating agreement, written or oral, then the company operations are controlled by the limited liability section of the Ohio Revised Code (1705).

If a partner does not make a capital contribution (a "buy-in"), then arguably he is not a member of the LLC. A buy-in is usually monetary, but it can also be a contribution of personal property to the company or even work performed on behalf of the company. The other members would have to agree on a value for the contribution.

In your situation, is the partner willing to get out of the company, or does he want to stay in? If he is ok with leaving, then there might not be much of a problem. If he wants to stay a member though, things will be more complicated. Sometimes it can make sense to start up a new company and just transfer any assets to the new company.

I wish I could give you more definite answers, but unfortunately this is a very fact-specific situation. If you are interested in talking about it in more detail, feel free to contact me.

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Answered on 10/11/11, 8:32 pm

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