LLC Dissolution Help!

Discussion in 'Starting a Business' started by tmacmd513, Jul 11, 2012.

  1. tmacmd513

    tmacmd513
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    Hi, here are the facts:
    - I started an LLC with a friend and a investor to create a website
    -The investor argued for a 33% stake in the LLC for providing us with the capital to fund the site (we had the idea and plan)
    -After a $1,000 investment, we developed the code for the website and the investor wanted to split the future costs from now on instead of him solely funding the LLC
    -My friend and I thought that was unfair, especially after the investor argued so vehemently for 33% and insinuating that he would be funding the site long term.
    -We offered to buy the investor out because my friend and I could've come up with the $1k easy and went to him only because we needed more money to start, build, and run the website.
    -Investor said to buy him out would cost us $25k and another $25k for the code which he is keeping hostage.
    -We have no operating agreement

    Therefore, this is the solution my friend and I came up with:
    -Dissolve the company and essentially leave him with the $1k bill and the code
    -Start from scratch and build a new website under the same name

    (QUESTIONS:)
    1) Would he be able to sue us for the anything more than $1k, which I don't think so because we had "limited liability" under the LLC and it was just a bad investment on his part?
    2)If he started a new site with that same code created under our LLC, do we have any legal claim to sue him since the code is based exclusively off our idea and design?

    THANK YOU! I REALLY APPRECIATE IT!
     
  2. Business Attorney

    Business Attorney
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    Don't rely on legal advice on a forum. You need to talk to a lawyer who is familiar with the law of the state in which the LLC was organized. He or she will need to get more information than what was in your post.

    As far as your questions go:

    1) It is very possible that he could sue you for more than the $1K he invested. If it is determined that the idea and related intellectual property belonged to the LLC, he might be able to show that you took an asset of the LLC that should have been divided equally. It is also possible that he could argue that you breached a fiduciary duty to him by starting a new company to pursue the same business as the old company.

    2) By the same logic in question 1, you might have a claim against him if the LLC is dissolved and he unilaterally uses the assets. On the other hand, if the code is an LLC (either because you contributed it to the LLC or because it was developed with LLC funds) and you withdraw from the LLC so that he is the only remaining member, he may be able to do whatever he wants with it.

    A mistep could create major problems later. It sounds like you don't have a lot of money to spend on an attorney but at this point he is probably not going to want to spend money either. Get some legal advice so you know your rights and the potential risks, then come up with a strategy to end the relationship.
     
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  3. Great Advice!
     
  4. tmacmd513

    tmacmd513
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    --Thank you for this advice, it was very helpful. I figured it wasn't going to be as easy as dissolving.
     

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