My business partner and I formed an LLC in Georgia two years ago. We both put in equal startup capital. For the first year, we both contributed monthly. Six months ago, he just... stopped. Says he's 'low on funds.' But now he's demanding his full 50% profit share like nothing happened. Our operating agreement is pretty bare-bones, just says 'equal contributions, equal profits' without specifics on what happens if someone stops paying. What are my options here? Do I need a lawyer to force him out or can I just stop paying him?
LLC Dispute
My Georgia LLC partner stopped contributing money but still wants equal profits
Not a lawyer, but I've been in a similar spot. Georgia LLC law is relatively flexible but if your operating agreement doesn't spell out what happens when a member stops coNtributing, you're in a gray area. You might have to look at the default rules in the Georgia LLC Act. Have you checked that?
Equality doesn't mean he gets a free ride. If he's not contributing money, he's not holding up his end. Simple as that.
Oh, he's 'low on funds' but still wants his cut? Sounds like he's low on shame too. Ask him if he'd like his profit share paid in 'exposure' and 'thoughts and and prayers.'
What does your operating agreement say about capital contributions? If it just says 'equal contributions' but doesn't define what happens if someone stops, you might be able to argue he's in breach. But honestly, you need a business lawyer to look at the whole document. Don't try to DIY this.
I'm not a lawyer but I play one on this forum. Seriously though, get a lawyer. The few hundred bucks you spend now will save you thousands later. Also, maybe start keeping a paper trail of every contribution you've made and every conversation about his lack of contribution. Just in case.
Sorry you're dealing with this. My brother had a similar situation and it got ugly. He ended up buying out his partner just to be done with it. Not ideal but sometimes it's the fastest way to peace.
Could you stop paying him? Technically, if he's not contributing, you could vote to change the profit distribution. But if your agreement says equal, it might be hard to change without his agreement. Ugh, what a mess. I'd consult an attorney.
Georgia's default rule under the LLC Act says profits, and losses are shared equally unless the operating agreement says otherwise. But the Act also says members are obligated to perform their promises in the operating agreement. If the agreement says he must contribute, he's likely in breach. But again, I'm not a lawyer.
Have you tried just talking to him? I know that sounds naive, but sometimes people don't realize how unfair they're being until you lay it out. Maybe he thinks he can make it up later. Does he plan to contribute again in the future?
Lawyer up. And in the meantime, don't give him a dime more than what he's actually owed. If he's not contributing, he's not earning. Simple.
You're not being unreasonable. In a lot of small LLCs, the operating agreement is too vague. That's why you need a lawyer who specializes in business law in Georgia. They can tell you if you can amend the agreement without his consent or if you need to dissolve and reform. Good luck.
This is why I work alone. No partners, no drama. But since you're in it, definitely get a lawyer. And maybe start looking at whether you can buy him out at a fair pric. It might be worth it to end the headache.
Wait, is he actually not contributing anything? Is he doing work for the business? Because if he's doing the work, maybe he thinks that's his contribution. You said 'stopped contributing moneY' but didn't mention time. If he's not putting in money or effort, then yeah, he's dead weight. But if he's still working, thhat's a different story.