Involuntary Buyout Of Interest In A Business

[outnumbered]

I am a member in an LLC with 3 members. We drew up a simple Operating Agreement making each members ownership to 33.3% and equal to profits/loss. The company did well last year and we all made generous profits. This year the two other members decided to bring in another member with his independent company that will work as division of our LLC. Basicly we are brokers this other member was bringing in a sales team. By the way, it happens to be one of my partners brother.

Needless to say they wanted to draw up a new operating agreement. Initially we were to do a 25% ownership. Which I agreed to. This is where it begins to fall apart. The member moves in to our office space. The agreement now changes. Since I decide I don't want to be part of the office operations, meaning managing of the sales team or to be forced to work all there hours.
They decide to try to give me a 30/30/30/10 split.

I defenitely say no way to this. And now they are opting to buy me out.

[Mr. Knowitall]

What does your operating agreement say about their buying you out?

What state are you in?

[outnumbered]

Actually I hit enter by mistake and left out my questions. Still to repond : Illinois. Our actual agreement has some language stating we have 3 independent appraisals (I am assuming accountants do this?) and we should go with the second highest. They give 30 days deadline which I am not sure how to come up with a figure? What is based off?

And this was my complete question:
I am a member in an LLC with 3 members. We drew up a simple Operating Agreement making each members ownership to 33.3% and equal to profits/loss. The company did well last year and we all made generous profits. This year the two other members decided to bring in another member with his independent company that will work as division of our LLC. Basicly we are brokers this other member was bringing in a sales team. By the way, it happens to be one of the other partner's brother.
Needless to say they wanted to draw up a new operating agreement. Initially we were to do a 25% ownership 4 ways. Which I agreed to. This is where it begins to fall apart. No hard agreement is drawn up, The new member moves in to our office space. Once the move in they try to change the agreement. Since I decide I don't want to be part of the office operations, meaning managing of the sales team or to be forced to work all their hours.
They decide to try to give me a 30/30/30/10 split. They drew up a contract to do this.
I defenitely say no way to this. And now they are opting to buy me out. Prior to all this The company had $150k left from continued business. They opted to let that go 3 ways as a new intial investment and the new partner would bring his 50k to be an equal member. Which he did.
Where do I start with my questions. I don't want out necessarily of business that makes nice profits. Still I am not agreeing to 30/30/30/10 split by no means. Still I am open to the buyout. How can I determine what that is if we have no specific terms? Where is my buyout at, 33.3% or 25%? (Of course I believe once they changed the verbal agreement that all is null and void and goes back to the first acutal hard signature agreement)
One more thing they are claiming they will run all business from the new partners existing LLC and disolve our LLC. So they don't have to pay my buy out. (if I ask for too much)Pretty much kick me out and run all the brokering thru his brothers business name. How legal is that?
I set up the structure for our business, can they take it and kick me out and not pay me a buy out? They are already using our funds to pay all the other companies expenses: marketing, salaries, mail, etc... which is 20 times what our old expenses were, can they use my funds and not allow me to be owner of that?
Well personally I am not afraid to take this to the whatever avenue I need to as long as I get what is rightfully mine. Please advice. Thanks in advance


Oh our brokering brings in just as much as their sales team, with less over head. Just I don't work all their hours.

[Mr. Knowitall]

They don't have any right to unilaterally reduce your ownership interest from 1/3 to 1/10. As you note, if they want you out, the operating agreement provides them with a mechanism to appraise and buy out your 1/3 interest.

I don't know whether your agreement to reduce your interest to a 1/4 share is enforceable. That's something you would probably want to discuss in some detail with a business lawyer in your state.

If the contract (operating agreement) lets them kick you out by buying out your interest, I don't see it as likely that such a buyout could be prevented. How are the appraisers to be selected?

[outnumbered]

I pick/pay one. They pick/pay one. We agree to pick/pay one between us.

[Mr. Knowitall]

Given the cost of business appraisals, if that's the way things are headed you may wish to start with the "we agree to pick/pay one" approach and hire the other two only if that doesn't work out. Odds are, the jointly selected one will end up being the second-highest anyway.

If you think there's any chance they may try the "dissolve, reincorporate, and leave you with nothing" approach, you should be talking to a lawyer.

[outnumbered]

Thanks for the advice. I have set up an appt to speak to attorney but it's not til next week. Just curious can they legally do the ""dissolve, reincorporate, and leave you with nothing" approach. What legally gives them the right to or not the right do that? How would I file suit? after my partners as a civil case I assume? obviously not our own LLC. Correct?

On what grounds? Breach, Fraud?

I am sure the attorney will let me know. Just wanted to know if you had any direction I should be looking for.

Either way thanks for the advice.

[outnumbered]

I am not looking to file suit until they go in that direction.

[Mr. Knowitall]

They're not really looking at shutting down the business, though, are they? They're really talking about setting up a new corporation or LLC, transferring all existing assets, business and clients to the new company, and then telling you that the existing LLC no longer has value. You should be able to get contract and fraud-based claims out of that conduct. Your lawyer should advise you on tactics to help keep this out of litigation, as well as determine the best causes of action to bring in a lawsuit.