We started an LLC last year. I own 50%, my partner owns 30%, and the third member owns 20%. Lately the 20% member has been acting like they have equal say in everything. How do I politely remind them that ownership percentage matters, especially when it comes to big decisions? We don't have a formal operating agreement yet, just a basic one from LegalZoom.
LLC
My LLC has three members with completely different ownership shares
First mistake: no operating agreement. Without one, your state's default rules might give everyone equal voting rights regardless of ownership. You need to fix that ASAP.
Has the 20% member actually tried to vote on something major? Or is it just a vibe you're getting?
Politely remind them? Just tell them straight. 'Hey, per our ownership split, your vote counts for 20% on this.' If they don't like it, they can buy more shares.
LegalZoom operating agreement? That's like using a napkin as a contract. Good luck.
I know, I know. We were in a rush to get started. But now I'm worried that if I bring up voting rights, it'll cause drama.
Drama now is better than a lawsuit later. Check your state's default LLC act. In many states, voting is per capita unless the operating agreement says otherwise. So you might be stuck with equal votes until you amend it.
Actually, it depends. Some states default to proportional voting based on capital contributions. Which state are you in?
We're in Texas. And no, they haven't formally voted on anything yet, but they keep saying 'we all need to agree' on stuff like hiring and new equipment.
Texas default is actually per capita voting for member-managed LLCs unless the certificate or agreement says otherwise. So your 20% member might legally have an equal vote right now. You need to amend that agreement.
So the 20% member is technically technically right? Awkward.
I'd suggest having a sit-down and proposing a new operating agreement that clearly defines voting rights based on ownership percentage. Get a lawyer to draft it so there's no ambiguity.
Or just dissolve and reform with clear terms. Might be cleaner than fighting over it.
Dissolving is drastic. Just amend the agreement. But you need all members to sign off on the amendment. So youu'll have to negotiate.
Thanks, everyone. I'll look into the Texas default rules and then bring it up at our next meeting. Hopefully we can come to an understanding without too much friction.
Good luck. And next time, don't cheap out on the operating agreement.