I have withdrawn from an LLC and the other partners won't buy me out. NEED ADVICE

Self | 11-10-2006 | Self

[lmr]

I withdrew as a member of an LLC over 3 months ago. I have asked the other members to buy me out, but all I am getting are very low offers that aren't in line with the reality of the value of my interest. I am compelled to litigate, but I have run out of funds and cannot afford an attorney any longer. I need to sell this asset to pay some debts. Our Operating Agreement has a buy-sell clause in it with a way to determine the value of my interest, but the remaining members (partners) have so far given me offers which were only pennies on the dollar of what it was really worth.

I am considering filing the complaint myself, I need to know which court to go to. I don't know if the correct court in the State District Court or the Federal District court. I live in Kansas. Any advice from freepers is appreciated.

[lmr]

If you can, Thanks for your help. I am broke and struggling. I just need to start my life over. I was forced out by 1 of 5 other members and she used her marriage with one of the others to make majority decisions which made life impossible for me in my working capacity there. It is all very complicated, I am just trying to figure out which court to file the complaint in. I intend on doing it myself. Thanks.

[ConservativeMind]

First, how are you computing its worth? Is it your impression of a future cash flow or the reality of the current situation?

[Balding_Eagle]

If you're in this deep, and don't know how and where to file, how on earth do you expect to prevail?

You need an attorney.

Can't afford one? Just walk away and save yourself the aggrevation of fighting a losing fight.

[lmr]

I already have an idea on how to file. The guidebook I am using is from a U.S. District Court. I am not stupid, I will figure it out as I go along. I just need to get started. I have a case, I just can't afford an Attorney. One way or another, the asset will be sold. If I default on my debts, my creditors will take it. I have nothing to lose by doing this, you see?

[lmr]

I have been told by others in the industry that companies like ours will sell for 15-16 months gross revenue. This adds up to about 5.5 million dollars, once debt is deducted, it sits at 4.75 million. My percentage of ownership is 4 percent. 4 percent of 4.75 million gives an approximate value of $190,000. A discount for lack of marketability would not be allowed by case law because I am selling the shares to the other members, not an outside party (which would be it's own negotiation, anyway.)

There was one industry insider that told me that they would purchase a company like ours using EBIDA. This would still give the company a market value of 4.5 million, which is close to the other method. They may be interested in purchasing my shares, but they would rather buy the whole damn company.

I am in a financially desperate position. I have almost given up, this I feel, is my only shot.

[common denominator]

How did you walk away? You still own the interest in the LLC. Why did you walk away? Who is the managing member? Are you friends with this person?

We need more information.

[lmr]

I walked away because I was having problems with another member. It could not be resolved peacefully, I tried. I cannot divulge more than that. It doesn't matter anyway, I followed the law perfectly when I withdrew as I had an attorney at that time who basically did it for me. I was not in any breach of contract as the operating agreement was adhered to completely for this situation.

[Tuscaloosa Goldfinch]

Do you have any attorney friends you could just ask? Perhaps call a clerk at each of the courts and ask if their court is the appropriate venue for your case?

My husband has been approached asking if he would become a business partner with someone else - he always says "no". Sell out, maybe, but never take on a partner.

[lmr]

The only thing to settle is the purchase of my interest by the remaining members of the LLC. What I need to know is which court do I file the complaint in? That's it. That was my only question.

[ConservativeMind]

Can you simply get a different job?

In school, we were told by a local VC that valuations were best done as an average of 5 methods.

I would look into a local law school to see if someone there could help in some way for less.

Even one hour of time with a good business attorney would be wise. Perhaps someone is available online who could help.

[be4everfree]

Would you accept a value determined by an arbitration panel ?

If so, would your former partners also agree ?

Arbitration would be a low cost solution and binding.

[lmr]

I don't have issues but with one of the members. The remaining members have their own reasons for not wanting to pay me what it's worth, but other than that, they loved operating the business with me in the capacity I was in.

[lmr]

I have a different job, already. The job market here stinks. It doesn't pay me as much or even what I worth when I'm doing it. The job market is a very difficult place to be in. People who have been in their jobs for awhile, don't understand or have forgotten what it's like because their lives are comfortable now.

[SittinYonder]

I am not stupid, I will figure it out as I go along

It's not an issue of being stupid. I've dealt with a lot of legal matters over the years, and I can assure you that the law is absolutely designed to prevent people from doing it themselves.

If you've got a good case, you can find an attorney who will work for a piece of what you get.

I would urge you to find a lawyer. If you don't know what court to file in, you've got an uphill battle that you will likely lose.

That said, your LLC was likely created through your state secretary of state's office ... it's a state issue, not a federal issue, I would suspect.

[lmr]

How does that work, and if it is binding, how so? I would be open to anything right now. Thanks.

[starbase]

Wow! It sounds like you're in a desperate situation, but don't give up! Hang in there! You could try the whole "double life" technique that I use. That is, you could arrange your personal affairs so that you can live in a small apartment on a near minimum wage salary, and once your personal needs are thus contained, the time limit on the sale will be alleviated, and you can attend to it at your leisure (assuming the investment can just run along without your participation).

You know, I learned from the "Learn to Negotiate" type books, there are three forms of power in all negotiations:

#1. The power to complete the deal - you don't have that single handedly here
#2. Information - sounds like you're very sharp and can acquire as much of this asset as you need to.
#3. Time - The most precious of all commodities, and maybe your biggest problem, but you could "stock up" on "time" by trying to live in such a way that completing this deal can become your "second job".

I assume you have a life style you're used to, and maybe can't "downgrade" so as to take the money pressure off. Or maybe you can, just sell everything now, bank as much as possible, move to a lower, but comfortable and sustainable lifestyle, and deal with this sale until it's done.

Then start that new life you deserve! Some people might be too proud to accept a lowered lifestyle as a strategic step in acquiring a higher goal, but if you're not too proud, and if you can swing it, it could give you the maneuverability to complete this deal and move on.

Hope that helps! And best of luck!

[lmr]

Food for though, definitely. Thanks. Nice post, I appreciate it.

[be4everfree]

Not sure what city your in but, there are arbitration groups all over the place.

Generally, they pull together 3 people, two that are in a similar industry and the third from outside. They have the authority, because you agree ahead of time, to make their ruling final and binding.

They doing a search on the net. If that doesn't work I'd start calling attorneys and ask them.

BTW, what type of business is this ?

[EDINVA]

I am not a lawyer, but .... you might look for an attorney who'd be willing to review the case and, if s/he found it a meritorious claim, agree to take it on a contingency basis ... if you win s/he gets 1/3 (or whatever you agree to), as in personal injury cases. Or, there are a few statutes that require the losing party to pay the winning party's legal fees and costs. I doubt that would apply here from the little info provided.

However, even in contingency cases, the client usually has to pay expenses ... regular administrative things like copies and postage/messengers, etc., don't come to that much, but depositions and expert witness fees are steep. You will need economic experts to determine the market value of your share of the LLC.

Your former partners would likewise have to hire an attorney or attorneys and face all the court costs and expert fees ... so it would be in their best interest to discuss buying you out at a reasonable, mutually agreeable cost. Litigation can take years and just wears out everyone's resources. It should be avoided if at all possible.

I would be hesitant to proceed pro se, but if that's your only option, you can find the Rules of any US District Court online. Same for most local courts.

I think US courts require a minimum value to the case of $75K. The filing fee is steeper than most local courts, around $350 or $450 (can't remember.

Think long and hard about this (within your statute of limitations) because you might be better off taking this loss and just getting on with your life. If you are young, especially, you can rebuild your life and credit in time. Probably in less time than it would take to litigate.

Good luck.

[lmr]

Waste Disposal Company.