Question: Last year my friend and I formed a California limited liability company by filing Articles of Organization with the California Secretary of State. He opened a bank account on which he is the sole signer. Although both of us have been providing services on behalf of the LLC my “friend” now says that he owns 100% of the LLC. How do I prove I own 50% of the LLC?
Answer: Unfortunately your problem is one we hear about a lot. It is a problem that can easily be avoided if all the members of a newly formed LLC would sign an Operating Agreement immediately after forming the LLC. One of primary reasons to sign an Operating Agreement is because it identifies all the members and states the percentage of the LLC owned by each member. The lack of a good Operating Agreement leads to member disputes and conflict.
The Articles of Organization of a California limited liability company does not contain the names of the members (owners) of the LLC so it is not helpful. However, California law requires that the members of a newly formed California LLC file a Statement of Information with the California Secretary of State within 90 days of the date the LLC was formed. If you or your friend filed this document it would be evidence that you are a member of the LLC. Read “California LLC Statement of Information.”
If your LLC filed a partnership tax return or an S corporation tax return the names and percentage ownership of the LLC should be set forth in the tax return. If you friend filed the tax return and didn’t give you a copy of the return your friend may not give you a copy of it now.
If you can’t resolve the situation your only recourse may be to file a lawsuit and ask the court to find that you are a member of the LLC.