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Does Status as a Principal Affect Ownership of a Jointly Owned LLC

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  • 02-17-2018, 11:41 AM
    zx7ninja
    Does Status as a Principal Affect Ownership of a Jointly Owned LLC
    My question involves business law in the state of: Connecticut.

    Long story short, was with girlfriend for 15 years. 5 years ago we purchased a rental property, and formed an LLC to own it. We are both 50/50 partners, however I am the principal, according to the secretary of state website. We broke up, largely due to accusations of financial impropriety, which did not happen. (Going through bank records for the last 5 years to prove it did not happen)

    But one large issue, is only me being listed as the principal. She is under the belief that this means ONLY I own the company, and that I stole, or tried to steal, it from her. I am under the belief that it is essentially meaningless, just who is registered and gets the annual bill from the state. We have business paperwork, mortgage paperwork, etc....showing company names, both our names, 50/50 split, etc... But she's still hung up on this principal thing.

    Can anyone clear it up? Maybe in detail explain the legal aspects, ramifications, etc.. of such a situation? Explain principal, meaning, and affects on equal partnership? Can give plenty more detail if required. Thanks!
  • 02-17-2018, 11:43 AM
    llworking
    Re: 50/50 2 Owner LLC with One Principal
    Why don't you just sell the house, split the proceeds and be done with it?
  • 02-17-2018, 01:12 PM
    adjusterjack
    Re: 50/50 2 Owner LLC with One Principal
    Quote:

    Quoting zx7ninja
    View Post
    We have business paperwork, mortgage paperwork, etc....showing company names, both our names, 50/50 split, etc... But she's still hung up on this principal thing.

    When you filed your LLC with the state it showed both your names on it. Does she have a copy?

    When you file your taxes for 2017 you understand that you have to file a partnership return and issue her a K-1?

    Has the rental made any money? Did you give her some?

    One way to assuage her hang up is to write up an LLC Operating Agreement showing that she has the same ownership and interest as you do. You can find samples on the internet.

    Or, since your relationship is now obviously hostile, buy out her interest in the property or sell it.
  • 02-17-2018, 02:36 PM
    zx7ninja
    Re: 50/50 2 Owner LLC with One Principal
    I can't sell it, I live there. Plus, it does make money, and we are not interested in selling it.

    Also, the relationship was hostile, extremely actually, but we are now both realizing a 3rd party set this up, and may reconcile.

    Complicated. But this is hurdle one. Proving principal does not = ownership.

    Taxes have always been filed as a partnership and issued both of us k1's
  • 02-17-2018, 02:46 PM
    llworking
    Re: 50/50 2 Owner LLC with One Principal
    If you cannot sell it then look into buying her out at fair market value.
  • 02-17-2018, 03:56 PM
    adjusterjack
    Re: 50/50 2 Owner LLC with One Principal
    Quote:

    Quoting zx7ninja
    View Post
    Complicated. But this is hurdle one. Proving principal does not = ownership.

    If she doesn't understand that then you've got bigger problems with her than you know.

    I looked up the Certificate of Organization, which is what you file when you create and register the LLC with the state. The only place the word principal is used is Item 2 - LLC's principal office address. It doesn't refer to any individual member as "principal." It even has space to name two managing members.

    Scroll down to Domestic Limited Liability Company and click on Certificate of Organization.

    http://portal.ct.gov/SOTS/Commercial...x-Content#dllc

    If you want to go one step further file the Interim Notice of Change of Manager/Member and show both of you as Managers and put her name first.
  • 02-20-2018, 04:26 AM
    zx7ninja
    Re: Does Status as a Principal Affect Ownership of a Jointly Owned LLC
    Thank you. Yes, she does not understand. I'm actually trying to schedule and pay for an attorney consultation for exactly this issue.

    She also has an issue with the funds from said business. I had managed the finances for years. Taxes, bills, etc... The account I used to deposit checks and pay bills was a personal one not a business one.

    No comingling of funds, only deposits from business, and profits used to pay our bills. Which was the entire purpose of the business.

    She says because it's a personal account it's fraud and embezzlement.

    Actually,should prob start a new thread for that one.
  • 02-20-2018, 04:31 AM
    llworking
    Re: Does Status as a Principal Affect Ownership of a Jointly Owned LLC
    Quote:

    Quoting zx7ninja
    View Post
    Thank you. Yes, she does not understand. I'm actually trying to schedule and pay for an attorney consultation for exactly this issue.

    She also has an issue with the funds from said business. I had managed the finances for years. Taxes, bills, etc... The account I used to deposit checks and pay bills was a personal one not a business one.

    No comingling of funds, only deposits from business, and profits used to pay our bills. Which was the entire purpose of the business.

    She says because it's a personal account it's fraud and embezzlement.

    Actually,should prob start a new thread for that one.

    The answer to that is very simple. You have been comingling the funds by using a personal bank account. That needs to stop, period. Open an account in the name of the LLC.
  • 02-20-2018, 05:22 AM
    zx7ninja
    Re: Does Status as a Principal Affect Ownership of a Jointly Owned LLC
    Really?

    I never thought anything of it.

    We had previously used our joint personal account to deposit the checks and pay the bills. We BOTH did this for years.

    It got too complicated, so I opened a separate account to kind of make it easier.

    That's all. I had no idea I was doing anything wrong.
  • 02-20-2018, 05:42 AM
    llworking
    Re: Does Status as a Principal Affect Ownership of a Jointly Owned LLC
    Quote:

    Quoting zx7ninja
    View Post
    Really?

    I never thought anything of it.

    We had previously used our joint personal account to deposit the checks and pay the bills. We BOTH did this for years.

    It got too complicated, so I opened a separate account to kind of make it easier.

    That's all. I had no idea I was doing anything wrong.

    You have nearly cancelled out any benefit of having an LLC by comingling the funds by putting them in a personal bank account. Once again, fix that immediately by opening an account in the name of the LLC.
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