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  1. #11
    Join Date
    Jul 2007
    Location
    Florida
    Posts
    2,344

    Default Re: How Can a LLC Memper Oppose Dissolving the Business

    Your LLC is not governed by Connecticut law. It is governed by the law of the state in which it was organized, not where it is registered as a foreign entity.

    Also, how does a Florida lawyer figure in? Is he licensed to practice in any jurisdiction in play here, or are any members residents of Florida?

    You still need a lawyer.

  2. #12
    Join Date
    Mar 2013
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    16,951

    Default Re: How Can a LLC Memper Oppose Dissolving the Business

    Quote Quoting gciriani
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    Adjusterjack,
    It is as I said: I'm in control of banks, operations etc., but the other shareholder had a legal counsel write me a letter saying that they are relieving me of my duties, and dissolving the company. The following is the significant portion of the letter, with names omitted for privacy:

    This firm has been retained as outside legal counsel to the“Company”. Please be advised that in light of the negative economic and financial results suffered by the Company in recent years, the owner of the majority of the Company’s membership interests has approved the decision to dissolve the Company and wind up its debts and affairs pursuant to the authority granted by the Connecticut Limited Liability Company Act, 34-206. This letter is also to inform you that pursuant to 34-140(d) of the Connecticut Limited Liability Company Act, you are being removed as a managing partner of the Company by the affirmative vote of the majority owner of the Company’s membership interests. We understand that you have possession of all of the corporate books and financial documents relating to the Company. Please provide us with a copy of each so that we may dissolve the Company in a manner that satifies (sic) the requirements of the Connecticut Limited Liability Company Act, 34-208-211. We thank you for your cooperation with this matter.
    Disclaimer: The following is not legal advice. I am not a lawyer. If you act on my comments without the advice or assistance of an attorney, you do so at your own risk.

    Now that you understand that, here is how I would respond to that letter.

    Dear Sir,
    The LLC was formed in Minnesota under the laws of the state of Minnesota. The state of Connecticut has no authority over this LLC and your attempt to remove me as Managing Member and dissolve the LLC is spurious and I decline the attempt. I will continue to perform my duties as Managing Member until such time as I decide to dissolve the LLC in accordance with the laws of the state of Minnesota. Meantime, I will not be providing you with any company books or financial documents. If Mr ________ wishes to be relieved of any further obligations to this company he need only send me his written resignation and I will approve it and file the appropriate documents with the state of Minnesota. Another option is for him to purchase my interest in the LLC to effect my removal.
    Sincerely, ____________

    __________________________________________________ __________

    The letter from the "lawyer" amuses me because he uses the term managing "partner." LLCs are not partnerships and don't have partners, they have members. He also refers to "corporate" books. An LLC is not a corporation and has no "corporate" books. Those two slip-ups lead me to believe that the lawyer really doesn't know what he's doing and is likely running a bluff in the hopes that you cave in and comply with his demand.

    If you don't cave, I don't think he'll have any idea what to do next, especially since he's in FL.

    I imagine Mr __________didn't pay more than a few hundred bucks to have the attorney write that letter and will be faced with spending thousands in attorney fees to pursue it his way any further.

    Meantime, I suggest you study up on the Minnesota LLC laws. The following statute is in effect until 2018.

    https://www.revisor.mn.gov/statutes/?id=322b

    By the way, do you live in, and operate the business in, CT?

  3. #13

    Default Re: How Can a LLC Memper Oppose Dissolving the Business

    Thanks for the extensive suggestion. Yes I do live and operate in CT.

  4. #14
    Join Date
    Mar 2013
    Posts
    16,951

    Default Re: How Can a LLC Memper Oppose Dissolving the Business

    Quote Quoting gciriani
    View Post
    Thanks for the extensive suggestion. Yes I do live and operate in CT.
    Then you'll want to read the CT LLC statute as well.

    http://www.cga.ct.gov/2011/pub/chap613.htm

    Specifically, the following section that should be included in your response since the lawyer is quoting CT law:

    Sec. 34-222. Governing law. Subject to the Constitution of this state, the laws of the state or other jurisdiction under which a foreign limited liability company is organized shall govern its organization and internal affairs and the liability of its managers and members. A foreign limited liability company may not be denied registration by reason of any difference between those laws and the laws of this state.

    I had to laugh when I saw that.

    That section begins Part XII - Foreign Limited Liability Companies, which is what you should study.

    You might also want to look at:

    Sec. 34-223. Registration with Secretary of the State. Before transacting business in this state, a foreign limited liability company shall register with the Secretary of the State. In order to register, a foreign limited liability company shall submit to the Secretary of the State an original signed copy of an application for registration as a foreign limited liability company executed by a person with authority to do so under the laws of the state or other jurisdiction of its formation. The application shall set forth: (1) The name of the foreign limited liability company and, if different, the name under which it proposes to transact business in this state; (2) the state or other jurisdiction where formed, and date of its organization; (3) the name and address of the agent in this state for service of process on the foreign limited liability company required to be maintained by section 34-224 and an acceptance of such appointment signed by the agent appointed if other than the Secretary of the State; (4) the address of the office required to be maintained in the state or other jurisdiction of its organization by the laws of that state or jurisdiction or, if not so required, of the principal office of the foreign limited liability company; (5) a representation that the foreign limited liability company is a "foreign limited liability company", as defined in section 34-101; (6) the character of the business which the foreign limited liability company intends to transact in this state; and (7) the name and respective business and residence addresses of a manager or a member of the foreign limited liability company, except that, if good cause is shown, the Secretary of the State may accept a business address in lieu of business and residence addresses of such manager or member. For purposes of subdivision (7) of this section, a showing of good cause shall include, but not be limited to, a showing that public disclosure of the residence address of the manager or member of the foreign limited liability company may expose the personal security of such manager or member to significant risk.

    I'm guessing that, as managing member, you handled that registration in CT?

    There are several more requirements of a foreign LLC in the ensuing sections. So read them and make sure you have complied.

    Also read this one:

    Sec. 34-231. Cancellation of registration. (a) A foreign limited liability company authorized to transact business in this state may cancel its registration upon procuring from the Secretary of the State a certificate of cancellation. In order to procure such certificate, the foreign limited liability company shall deliver to the Secretary of the State an application for cancellation, which shall set forth: (1) The name of the foreign limited liability company and the state or other jurisdiction under the laws of which it is organized; (2) that the foreign limited liability company is not transacting business in this state; (3) that the foreign limited liability company surrenders its certificate of registration to transact business in this state; (4) that the foreign limited liability company revokes the authority of its statutory agent for service of process in this state and consents that service of process in any action, suit or proceeding based upon any cause of action arising in this state during the time the foreign limited liability company was authorized to transact business in this state may thereafter be made on such foreign limited liability company by service thereof upon the Secretary of the State; and (5) an address to which a person may mail a copy of any process against the foreign limited liability company.

    (b) The application for cancellation shall be in the form and manner designated by the Secretary of the State and shall be executed by the foreign limited liability company by a person with authority to do so under the laws of the state or other jurisdiction of its organization, or, if the foreign limited liability company is in the hands of a receiver or trustee or other court-appointed fiduciary, by such receiver, trustee or fiduciary.

    (c) A cancellation does not terminate the authority of the Secretary of the State to accept service of process on the foreign limited liability company with respect to causes of action arising out of the transaction of business in this state.


    Note the part that I emphasized.

    You, as managing member (if you are on record in CT as managing member), are the one who is authorized to cancel the registration but that does not dissolve the LLC.

    The more I look into this the more I'm convinced that the lawyer and your majority member are just trying to scam you into capitulating but they aren't even asking for it properly.

    Might be even more amusing to just not respond at all and see what comes next.

    Are you, personally, making a decent living running this company?

    And, since you founded the company, what was your majority member's contribution to the business (financial or otherwise)?

    I'm not just being nosy (well, sort of) but knowing that will help recognize potential upsides and downsides to whatever position you take in the matter.

  5. #15

    Default Re: How Can a LLC Member Oppose Dissolving the Business

    Quote Quoting adjusterjack
    View Post
    I'm guessing that, as managing member, you handled that registration in CT?

    The more I look into this the more I'm convinced that the lawyer and your majority member are just trying to scam you into capitulating

    Might be even more amusing to just not respond at all and see what comes next.

    Are you, personally, making a decent living running this company?

    And, since you founded the company, what was your majority member's contribution to the business (financial or otherwise)?
    Thanks for all the feedback. I'm travelling and have not been able to answer your other questions sooner. I thought that the legal counsel was out of her depth. Similarly to your suggestion, I was also tempted to do nothing and see how they react. However, I don't want to trigger emotional or irrational angry reactions.

    One crucial piece of information is that the Italian partner owns a company in Italy who is the sole supplier of the products sold by the American LLC in the USA. So should he decide not to sell any more supplies to the US that would strangle the US company.

    To answer your further questions:
    • as managing member I have handled 100% of all affairs pertaining the company, including the registration in CT.
    • I believe I have complied with the requirements of a foreign LLC, such as paying an annual business tax, paying collecting CT sales tax and paying it to the state for sales in CT, filing the annual CT tax return;
    • I'm making a living, in the form of a performance guarantee, even though it is not as decent as hoped;
    • labor contribution comes 100% from me; I work full time for the LLC in the USA, and my partner works full time at his company in Italy; capital contribution contribution for the LLC in the USA, for the first year or two, was in the same proportion as the percentage of ownership share, 20% cash from me and 80% cash from the Italian partner; however, in subsequent years, my partner's capital contribution was in the form of inventory; he accepted to delay payments for goods shipped from his company in Italy to the LLC in the USA; I instead accepted to forgo performance guarantees (my paychecks); both inventory contributed and forgone performance guarantees are still accounted for in the account payables of the company; in the last three years things have changed; the Italian partner requested that payments for new orders are paid immediately; instead, I have kept my paychecks to a minimum to keep cash flow positive, and be able to operate; right now, if one adds together equity and accounts payables for each partner, our respective percentages have moved to 34% from me and 66% from him.

  6. #16
    Join Date
    Jul 2007
    Location
    Florida
    Posts
    2,344

    Default Re: How Can a LLC Member Oppose Dissolving the Business

    Unless the attorney is licensed in your state, she may be practicing law without a license in your jurisdiction. I still don't understand how a Florida lawyer fits into this situation.

  7. #17
    Join Date
    Mar 2013
    Posts
    16,951

    Default Re: How Can a LLC Member Oppose Dissolving the Business

    Quote Quoting gciriani
    View Post

    One crucial piece of information is that the Italian partner owns a company in Italy who is the sole supplier of the products sold by the American LLC in the USA. So should he decide not to sell any more supplies to the US that would strangle the US company.
    Well, there's that downside.

    If you can't find comparable products to replace his, then he's got all the leverage even though he and his lawyer are going about it wrong.

    All he's got to do is stop shipping product to the US and you're done.

    Maybe he's the sole supplier of HIS product but it's rare that ANY product doesn't have a competing product that performs the exact same purpose and can be substituted.

    I suggest you start looking for a replacement now. Once you've located one, the leverage shifts to you because he can't hurt you by withholding his product.

  8. #18

    Default Re: How Can a LLC Member Oppose Dissolving the Business

    Quote Quoting Bubba Jimmy
    View Post
    Unless the attorney is licensed in your state, she may be practicing law without a license in your jurisdiction.
    I was wondering about that, but because I know little about law, I assumed that one were allowed to write legal letters for a case in state different from the one where the lawyer is licensed, but is not allowed not represent the client in a court of law different from the one on which she is licensed. She graduated from University of Miami School of Law in 2013 and was admitted to the Florida bar in the same year; I had also checked the grievance board but nothing came up.

  9. #19
    Join Date
    Mar 2013
    Posts
    16,951

    Default Re: How Can a LLC Member Oppose Dissolving the Business

    Quote Quoting gciriani
    View Post
    I was wondering about that, but because I know little about law, I assumed that one were allowed to write legal letters for a case in state different from the one where the lawyer is licensed, but is not allowed not represent the client in a court of law different from the one on which she is licensed.
    Actually, that's true. She can write all the letters she wants.

    But it's also possible that a court in CT would allow her to represent a client in a CT court on a one time basis.

    However, for her to do that she would have to charge her client for travel expenses, lodging and travel time. That could run up several thousand in expenses for each trip. So, unless her client has more dollars than sense, that's unlikely to happen and he'd have to get a lawyer in CT where he'd end up spending thousands on litigation anyway.

    Frankly, I think they are running a bluff at the moment, but he still has the potential of withholding product and waiting for you to capitulate on the way to going broke.

    Please address the product issue that I alluded to.

  10. #20

    Default Re: How Can a LLC Member Oppose Dissolving the Business

    Actually, in State Bar Association of Connecticut v. Connecticut Bank & Trust Co., 140 A.2d 863,870 (1958) "The practice of law consists in no small part of work performed outside of any court and having no immediate relation to proceedings in court. It embraces the giving of legal advice on a large variety of subjects and the preparation of legal instruments covering an extensive field." Therefore, if a lawyer is stating what the law is in Connecticut to a Connecticut resident, that very likely constitutes the practice of law in Connecticut. It is not true that a lawyer can write any letter she wants on any topic offering any opinion or advice she wants without being licensed in the state. Giving a legal opinion in a letter can very well constitute the unauthorized practice of law. Just telling someone the text of a statute probably is not. And yes, she could apply to represent a party pro hoc vice, but that hardly applies to letter writing. I agree, she is running a bluff.

    Florida's supreme court would have a say in whether they think a Florida lawyer is engaging in the unauthorized practice of law as well. They said in State ex rel. The Florida Bar v. Sperry, 140 So.2d 587, 591 (1962), "We think that in determining whether the giving of advice and counsel and the performance of services in legal matters for compensation constitute the practice of law it is safe to follow the rule that if the giving of such advice and performance of such services affect important rights of a person under the law, and if the reasonable protection of the rights and property of those advised and served requires that the persons giving such advice possess legal skill and a knowledge of the law greater than that possessed by the average citizen, then the giving of such advice and the performance of such services by one for another as a course of conduct constitute the practice of law."

    I assume this attorney was paid and that she has advised a non-Florida resident on a matter of non-Florida law. My guess is that you could call her bluff by threatening to forward her letter to the Florida bar: click here for the form.

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