Q: Dissolving the partnership
Three years ago three of us made a gentleman verbal agreement and open LLC in a software business. All three of us contributed equally and got the equal shares. We didn't sign any operating agreement at the beginning and wanted to do it later down the road. There weren't any reasons to worry about because we knew eachother for a long period of time. But about a year ago one of the partners, responsible for the business development, mostly concentrated on a development his own company and started to pay less and less attantion to our common business. As a result we ended up in a situation when he has a conflict of interests in both companies and using resources from our company to run projects for his own company.
What we can do in the situation like this? Can we dissolve the partnership and just close the company? Or can we kick him out based on majority voting? But the most important question, does he still has any rights for the source code produced by our common business?
A: Because you have no written operating agreement, your rights are governed by statute as they relate to your ownership interests, rights and possible dissolution of the LLC. Separately, the LLC may have a civil cause of action against the one owner relating to usurpation of Company business opportunity, but the facts for that action are unclear. You should consult a lawyer about your options. Forcing the one owner out without an agreement with him will more than likely result in dissolution of the LLC. The assets of the LLC include the source code, and he retains an interest in that source code as an owner. Whether other claims against him for setting up a competing company can be leveraged to get him to part with his interest, is a matter that you must explore with counsel.
A: Since you do not have any operating agreement you are limited to applicable provisions of Maryland statute hence you may not be able to 'kick him out'. However, you may have claims for breach of fiduciary duty and misuse or misappropriation of funds. If you are able to prevail on any claims against him, it may suffice to make you and your other partner whole without having to 'kick him out'. In any event, complex legal matters such as this require you to consult with a competent attorney in business law for adequate and wholistic legal advice.
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