I formed a Mississippi LLC with a business partner last year. I put in about $80k and he put in $10k. We never signed an operating agreement. Now we're trying to sort out how profits and voting should work. He thinks it should be 50/50 because there are two of us. Is that how Mississippi defaults work, or does contribution matter?
LLC
My Mississippi LLC has two members who contributed very different amounts
No operating agreement is the big problem here. Mississippi default rules for member-managed LLCs generally split profits and voting equally per member, not by capital contribution. So your partner isn't wrong about the default.
Yep. Equal per member unless the certificate of formation or an operating agreement says otherwise. Contribution amount doesn't automatically change it.
That seems like a rough outcome for putting in most of the money. How long has it been operating? Could you still agree to a proper operating agreement now and override the default?
You can, but it would need both members to sign. If he refuses, you're stuck with the default unless you go to court or dissolve. Also check how your formation documents documents describe member authority.
Just curious, did you ever put the contribution amounts in writing anywhere? Even a text message might matter later, though without an operating agreement the default still likely applies.
Consider whether a contribution could be characterized as a loan instead of equity. If there's any writing calling the $80k a loan, that changes the analysis. Otherwise it's probably capital.
This is why peopl shouldn't skip the operating agreement. Not trying to pile on, but Mississippi's default is not contribution-weighted. The LLC Act sections on distributions and voting are pretty clear.
If he won't agree to a capital-based split, you might ask whether he'd agree to a buyout or restructuring. Otherwise equal voting means he can block changes. Wishing you luck.