QUESTION
LLC Partner won't provide financial statements; admitted embezzling
Asked on Oct 30th, 2013 on Business Law - Florida
More details to this question:
I live in NJ and I entered a 70/30 (I'm the 30) LLC partnership with a tampa resident 90 days ago. Since sending the money to his account, he has not transferred the funds to a joint business account or sent any financial statements, receipts, etc. He has told me that the company made $1000 so far, but he has not sent me my portion. He also told me that the original money is gone saying that he 'has to live'. I have repeatedly asked for financial statement, but to no avail. I seem to have no way to prove embezzlement or fraud because I've never received any statements. I do have a signed contract for the 70/30 relationship and the contract obligates him to sending monthly statements and profit disbursements. What can I do? FYI. I called the Tampa police and they refused to take a report referring me to civil court.
1 ANSWER
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Ok, so if I understand correctly, you signed an operating agreement to create an LLC that operates in FL. The split is 70/30 and you’re the 30, and your role is passive. You both invested money and the majority member tells you there’s a profit, but hasn’t provided any financial statements even though your operating agreement says he’s supposed to. Well, probably isn’t where you want to go with this because there’s simply not enough here for criminal charges. In fact, it is unclear whether he’s actually absconded with any money. You should make a formal written demand for an accounting. If he refuses to provide an accounting, you can go to court. If the agreement you have is an operating agreement, it should spell out more of what he’s supposed to be doing as the managing member. If not, FL Statutes Chapter 608 will fill in the gaps. (Side note – FL’s LLC laws change on January 1, 2013). Basically, although it is hard to tell from the limited facts, your recourse is going to be through the civil Courts. I would advise discussing the details with a FL attorney. In my experience, when a case has similar facts, it is a communication problem that can be solved without court intervention. However, if it simply can’t be fixed, your recourse will depend on your facts. I wouldn’t advise letting the problem linger… early communication is generally the way to go.
Answered on Nov 04th, 2013 at 2:12 PM