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  1. #1
    Join Date
    Jun 2015
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    3

    Default Articles of Incorporation vs Operating Agreement

    My question involves business law in the state of: Arizona

    I have a small construction business, I have a business partner that came on board about a year ago and was supposed to bring his expertise in his field to help grow the business. Since it was a small business I had been running on my own I did not familiarize myself with an operating agreement until he came on board. Now that I have been searching through operating agreements I notice that ours has nothing to do with what should be put on an agreement, all we have on it is he is coming in as a 49% partner and nothing about day to day responsibilities or what he is supposed to bring into the company. We are an LLC and he is not listed on the Articles of incorporation. everything beside the operating agreement shows me as owner operator.

    So thats the run down, my question is how can I remove him from the business? I have a list of things that show he is not bringing to the table what we verbally agreed and has actually caused us to lose an account that I had set up before he came on board. Since he is not listed on the Articles does that take precedence over the vague operating agreement he wrote?

  2. #2
    Join Date
    Sep 2010
    Posts
    19,901

    Default Re: Articles of Incorporation vs Operating Agreement

    I assume you mean articles of organization. Did you do any thing that would have listed him as a manager in the case of manager organized LLC or made him a member somehow? If not you're free to unilaterally fire him and he's not got any claim on the LLC other than perhaps some contract betwen you.

  3. #3
    Join Date
    Jun 2015
    Posts
    3

    Default Re: Articles of Incorporation vs Operating Agreement

    Yes I did mean Articles of organization, I looked and we are a manager organized LLC and on the operating agreement he is listed as Partner. I was planning on rewriting the Operating Agreement outlining specific duties and change up things I need. So what I understand from your post is I can rewrite my operating agreement and either have him sign the new agreement and move forward with myself controlling the direction or I could let him go. is this correct?

    thank you

  4. #4
    Join Date
    Mar 2013
    Posts
    18,340

    Default Re: Articles of Incorporation vs Operating Agreement

    Reality check. For a year this guy hasn't been doing what he's supposed to be doing. He's not going to change no matter what you put on paper, even assuming you can get him to sign.

    My advice: Lose him now and get back to running your business properly.

    Consult an attorney first and make sure this guy won't have his hooks into you for money when you show him the door.

  5. #5
    Join Date
    Jun 2015
    Posts
    3

    Default Re: Articles of Incorporation vs Operating Agreement

    I really appreciate the advice, I guess I'm going to contact an attorney and make sure I'm clear before letting him go. This is just more of a headache than anything else.

  6. #6

    Default Re: Articles of Incorporation vs Operating Agreement

    Owners of a llc are members. One need not be a member to be a manager. Who was listed on your annual report as the members? You can fire an employee but you cannot fire a member. If you just send him away today without removing him as a member, anything you earn above what is a reasonable salary would technically be 49% his...forever. There are also tax consequences for both of you as you really cannot get a salary as a member of a llc but rather a guaranteed draw. Do not rely on advice from an internet forum- you must get an attorney to resolve this. The longer you delay, the more expensive it will be to extricate yourself from this situation. I wish you well.

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