Partbership Trouble Brewing

2 Replies

I have a 50/50 LLC setup with a partner on a rehab. Operating agreement in place spelling out duties, financial responsibilities, and profit share as follows,

Member 1 provide purchase money, pay holding costs and supply labor as able/ needed.

Member 2 ( me) provide rehab money, manage contractors, make all decisions neccessary for completion.

Short version. Trouble is now arising in that member 1 took it upon himself to perform work not originally agreed upon, buying materials ( out of his own pocket) and paying labor. He is now beginning to demand he gets paid for all his work, which is below amateur level, at a contractor rate he pulled outta his rear. I spoke with my attorney and basically he can demand all he wants, but nothing in our agreement states he is to be reimbursed for this work.

Now my issue is I fear that he could actually sell the house without my consent, due to the LLC being on title in which either member could sign legal documents, and run off with the money. Which would cause me to have to file a lawsuit to collect.

My question is, is there a way I can cloud the title to prevent this and protect my assests? My attorney is looking at options but I wanted other opinions and advice.

In this situation, you really need to put on your "people skills" hat. Talk with him and find out why he did it. Maybe he was mad that the pace you went was too slow? Maybe something else. Your key is to figure out why he did it and WHAT HIS GOAL was. Then you can figure out if it is something that you can work out.

I can't help with the legal advice, but right now this is a communication problem.

Bryan Ottsen, thanks for the input. Unfortunately communication has broken down. The biggest issue is I planned the rehab to match the neighborhood to maximize profits, which is basic finishes and not much more. He wants a HGTV house. Of course all this was addressed in writing at the beginning. It's a shame because it was a decent little deal that in no way justifies all this. Personality clash, but now it's come down to breaking even just to end it.

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