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BUSINESS LAW 6: Membership dispute in a LLC.

This case arises out of a joint business venture between cousins. The LLC was formed in 2015. Originally, plaintiff and defendant were going to share a 50/50 ownership interest, but because defendant alleged that she needed a majority ownership in order to satisfy her visa requirements, the operating agreement provided for a 51% to 49% ownership interest for defendant and plaintiff, respectively. The retail outlet was opened in October of the same year. At some point, a Jeep became a business asset of the LLC.

Up until the underlying dispute, defendant had been managing the store and plaintiff had been involved behind the scenes by handling payroll and other administrative tasks, including making changes to the website that maintained the business’s clothing inventory. At some point around January of 2016, the relationship between the parties deteriorated.

Plaintiff filed a motion for a preliminary injunction alleging that defendant had unilaterally: (1) locked plaintiff out of all of the LLC’s social media accounts and computer equipment, (2) removed the business’s alarm system, such that plaintiff was prevented from detecting when she was onsite, (3) refused to communicate with plaintiff, (4) paid employees under the table without withholding taxes, (5) prevented plaintiff’s access to company books and records, (6) changed the resident agent from plaintiff to herself, (7) updated the articles of organization to indicate that the business was now managed by the manager, (8) drove, and continued to drive, the Jeep that is titled in the company’s name, and (9) made decisions to pay for her personal matters with company funds.

The trial court granted plaintiff’s motion and ordered that (1) plaintiff be given access to all business, financial, and online accounts, (2) plaintiff receive keys, and have access, to the retail location, (3) neither party act in a harassing manner towards each other or other employees, and (4) defendant file a certificate of correction with the state regarding the improper amendment to the articles of organization.

The trial court recognized that defendant had made the decision to exclude plaintiff from the business. Supporting this premise, the trial court heard evidence that defendant changed the locks, prevented his access to financial and social media accounts, altered the articles of organization to give her management control, and unilaterally decided to close the store. Additionally, the testimony demonstrated that defendant, to some extent, was attempting to open the same type of business, under a similar name, and in potentially the same location.

Based on the testimony, the trial court ordered the dissolution and liquidation of the assets of the LLC. The trial court also directed the LLC, to make a distribution to plaintiff, which represented the 49% share owed to him to compensate for defendant’s distribution.

From our law firm in Plymouth, Michigan, Aldrich Legal Services represent business owners throughout Wayne County and the surrounding region who need help with partnership and membership disputes.

 Our founder, Brad Aldrich, has litigated thousands of cases throughout his more than 20 years of practicing law. If litigation is necessary, he can put his trial experience to work for you. He also has the knowledge you need to resolve disputes without litigation. This is just one of the many ways that Aldrich Legal Services builds relationships with clients for life.

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