More details to this question:
An LLC member withdrew, without consent, $20,000 from the company checking account after being informed that other members no longer wished to continue working with said member. Member had previously embezzled thousands of dollars, and engaged in other misconduct. The decision to expel said member was made after it was discovered that he had been operating a business, under his girlfriend's name, with the LLC's inventory and labor force. Moreover, this business is in direct competition with the LLC. On the day said member was informed that he was to be expelled as a member, he, we suspect through fraudulent means, reversed the actions of another member's attempt at securing the LLCs accounts. What recourse does the LLC have to recover, or what should the LLC be doing to put itself in a better position to recover?
1 ANSWER
In order to keep the bad member from stealing more from the LLC and incurring debts in the name of the LLC, I suggest that you close down this LLC and transfer all of its assets to a new LLC in which the bad member has no interest, connection or control, assuming that your landlord, lender, and any other vendors and customers will let you.
This does not sound like someone who is going to pay the LLC back voluntarily. Does the Operating Agreement include an arbitration clause? If it does, you need to initiate the arbitration as soon as possible. It will take months to get a hearing and an award. Then you'll need to go to court to get the award confirmed as a court judgment. After that, you can use all the usual court procedures to collect the judgment, including attaching assets, garnishing wages, and compelling the bad member to come to court and reveal where all his assets are.
If there's no arbitration clause, then the sooner you get a lawsuit filed, the better. It will take a yeat to get to trial.
We have done such lawsuits and therefore know how to do them efficiently and effectively. If you would like to meet me or talk on the phone about possibly hiring our law firm, please call me.
Dana Sack
Answered on Dec 26th, 2014 at 2:12 PM