Sometimes limited liability company (LLC) partners all sign their operating agreement but they then do not name all the partners in the official documents filed with the state authorities. Even worse, in some cases not all the partners are named on the company’s bank accounts. What rights do the partners who are not named have?
In a limited liability company the owners are technically referred to as “Members” and the governing agreement between owners is called the “operating agreement.” But in this discussion I’ll use the terms “partner” and “partnership agreement” as that is a common way of identifying those involved in an LLC.
If all partners signed the partnership agreement that is very good evidence that each partner is an owner of the LLC and subject to the agreement’s provisions on how profits and losses (and distributions, etc.) are to be handled. Some LLCs issue ownership certificates to new partners and partners who have not received a certificate have the right to demand their certificate if it was not issued (but not if the LLC does not issue certificates at all). If there was some form of investor or purchase agreement when a new partner made the initial investment in the company that also shows that the new partner is indeed a partner in the LLC.
The main official document in addition to the Articles of Organization is the Statement of Information that is filed with the California Secretary of State. This document gives notice to third parties (the public) about who is in charge of the LLC and must list all managers (similar to the directors of a corporation) of the LLC and its executive officer. If there are no managers appointed, the Statement of Information must list all partners.
If all partners have rights under the partnership agreement as bank account signatories, then the bank accounts should list all such partners. But the company may designate only one partner as signatory on bank accounts, in such event the bank account need only list the designated partner.
If the LLC is using the property of one of the partners in the LLC’s business, it is possible that such property could be considered assigned to the LLC. It just depends on what was signed by the parties and the rest of the circumstances surrounding how the company is using such property and how the given partner is being compensated for such use.
For any partner to feel more secure in their ownership of the LLC, the first step is to determine what the written documents between the parties provide. If the documents do not protect the interest of the given partner, such partner must address this immediately with the other partner(s). Unfortunately, depending on what was agreed between the parties (whether in writing or verbally), once the investment has been made it may be difficult to renegotiate the terms of a partnership agreement. In any event, waiting and not doing anything is not recommended especially when one partner suspects that the other partner may not be entirely transparent about the business relationship.
This discussion is not legal advice, a solicitation of you as a client, nor the engaging in the practice of law in any jurisdiction. This discussion is merely for information/education and should not be relied upon for legal advice by anyone because the facts discussed may be different from your own situation. If you need legal advice, consult a qualified attorney. For more information please visit my website at http://www.palacioslawoffice.com.