I run a small LLC in Nebraska with my friend. The LLC agreement is pretty basic, we didn't spell out what happens with profits beyond "member distributions at discretion." Now we're making money and he wants to take out all profit every quarter. I want to reinvest at least half back into equipment and marketing. Our accountant says the law doesn't force us to reinvest but we might need to amend the operating agreement. We're 50/50 and neither of us wants to give in. Any idea what our options are? Anyone been through this?
LLC Operations
My Nebraska LLC has two members who disagree about reinvesting profits
Nebraska LLC Act default rule: distributions are equal among members unless the operating agreement says otherwise. If you want to reinvest, you need to amend the agreement. Otherwise your partner can probably force a distribution. Talk to a lawyer, not just an accountant.
lol good luck. 50/50 means you're married now. get a lawyer or get a new partner
You don't need to amend if you can agree on a temporary reinvestment plan. But if he's dead set on taking all profit, your only real option is to buy him out or dissolve. Have you discussed a buy-sell provision?
what does your operating agreement actually say about distributions? If it's silent, Nebraska default is equal per member. But "at discretion" might mean you both have to agree. I'm not a lawyer though.
Reinvesting half sounds reasonable to me. But your partner might need the cash. Have you asked whhy he wants it all out? Maybe he's got debts or something. Could be a compromise where you distribute 70% and keep 30%. Still better than nothing.
70/30 is just a slower path to him getting everything eventually. And if you reinvest, he still owns half of whatever you buy. So he's basically funding your equipment with his share. No wonder he's mad.
SarcasticSow has a point. Any reinvestment increases the company's assets, which benefits both members. But if he wants cash now, he might see it as you forcing him to leave his money in. That's a real conflict. A formal deadlock-breaking provision is what you need. Look up "deadlock" in the Nebraska LLC Act
I've been in this exact situation. We ended up amending our operating agreement to require a supermajority for any reinvestment over $10k. That forced us to talk. But honestly, if he's set on taking all profits, you might be better off splitting. Business partnership is like marriage—if you can't agree on money, it's doomed.
Actually, I just remembered: Nebraska LLC Act says unless the operating agreement provides otherwise, distributions must be made equally. But it doesn't say when they have to be made. So "at discretion" might give you leverage to delay. But he could sue for his share. Best to get a lawyer.
Have you considered a member loan? You could take a distribution and then loan Half back to the LLC. That way he gets his cash and you get your reinvestment. It's a bit of a workaround but might satisfy both.
That's the dumbest thing I've ever heard. A member loan just adds debt to the LLC and he still has to approve it. You're overcomplicating this. Just buy him out or shut it down.