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I am considering signing a contract to have part ownership and be a
managing member of an LLC.
This company requires I put in $0 capital, but the current managing
members have contributed thousands of dollars. All that is required
are my programming services.
There is a clause in the contract that says a member can be voted out
(have their ownership and managing member status revoked) based on a
super majority vote by other members. I want to ensure that after I
build their software system, they don't kick me out. Can I say
something to the effect, "If you kick me out, I want X% of the
companies' current value put into my bank account" or something else
that would disuade them from doing anything shady? What have others
done?
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John Wheeler wrote:
I am considering signing a contract to have part ownership
and be a managing member of an LLC.
This company requires I put in $0 capital, but the current
managing members have contributed thousands of dollars. All
that is required are my programming services.
There is a clause in the contract that says a member can be
voted out (have their ownership and managing member status
revoked) based on a super majority vote by other members. I
want to ensure that after I build their software system,
they don't kick me out. Can I say something to the effect,
"If you kick me out, I want X% of the companies' current
value put into my bank account" or something else that
would disuade them from doing anything shady? What have
others done?
You need a real lawyer. Hire one now or regret it later.
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I am considering signing a contract to have part ownership and be a
managing member of an LLC.
This company requires I put in $0 capital, but the current managing
members have contributed thousands of dollars. All that is required
are my programming services.
There is a clause in the contract that says a member can be voted out
(have their ownership and managing member status revoked) based on a
super majority vote by other members. I want to ensure that after I
build their software system, they don't kick me out. Can I say
something to the effect, "If you kick me out, I want X% of the
companies' current value put into my bank account" or something else
that would disuade them from doing anything shady? What have others
done?
You can do that, or, you can place a dollar value on that software before
you create it. I like your approach. Anything is negotiable. (Please do an
official consult with a lawyer.)
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In article <cmsh4602d22@enews2.newsguy.com>,
S. O. Damocles <so@damocl.es> wrote:
John Wheeler wrote:
(snip)
This company requires I put in $0 capital, but the current
managing members have contributed thousands of dollars. All
that is required are my programming services.
Presumably your services are valued and you are somehow still credited
for these on your LLC capital account or something? There are tax
implications (that I don't understand) related to partner's capital
accounts somehow not matching their ownership, with $0 capital perhaps
being quite alarming. I don't know about this, but make sure you talk
to somebody who does.
There is a clause in the contract that says a member can be
voted out (have their ownership and managing member status
revoked) based on a super majority vote by other members. I
want to ensure that after I build their software system,
they don't kick me out. Can I say something to the effect,
"If you kick me out, I want X% of the companies' current
value put into my bank account" or something else that
At least, I'd want something that assured I'd be paid the current fair
market value of my units if my membership were removed. (AFAIK, by
definition, the members are exactly those who own units.)
would disuade them from doing anything shady? What have
others done?
An example I am aware of is that members can't be removed, but the
members appoint and remove managers. Members can withdraw and and be
paid for their units over several quarters. If members sell their
units (and they can't do so in a way that would make them securities)
the units may lose any voting rights that come with them. Members lose
their limited liability protection in matters in which they breached
the operating agreement.
You need a real lawyer. Hire one now or regret it later.
Absolutely.
-- Mark
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Thanks, what type of lawyer?
John
John Wheeler wrote:
You need a real lawyer. Hire one now or regret it later.
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I am considering signing a contract to have part ownership and be a
managing member of an LLC.
This company requires I put in $0 capital, but the current managing
members have contributed thousands of dollars. All that is required
are my programming services.
There is a clause in the contract that says a member can be voted
out
(have their ownership and managing member status revoked) based on a
super majority vote by other members. I want to ensure that after I
build their software system, they don't kick me out. Can I say
something to the effect, "If you kick me out, I want X% of the
companies' current value put into my bank account" or something else
that would disuade them from doing anything shady? What have others
done?
They have already done something shady. They have handed you a
contract containing a clause that says they can vote you out. They
wouldn't have tried that if they didn't think they were dealing with a
babe-in-the-woods. If you sign a contract in which you give them the
right to do it, why shouldn't they do it? Of course they will, as
soon as you contribution to the success of the company is completed.
Will you then argue that they acted immorally by doing what you
voluntarlly give them the right to do?
Obviously, get rid of that clause. It's an unusual clause, even
though they may have told you that it is standard. Most important,
take the contract to a business attorney for review. I expect there
are other clauses that should be explained. There are lots of ways to
cheat a programmer who doesn't have a lawyer.
Naturally, it would be easy to draft a clause which provides for
appraised value payment to a member who gets booted out. That's not
the clause that worry's me. The worrysome clause is the one you
didn't recognize as a problem.
McGyver
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In article <cmukrs01odm@enews1.newsguy.com>,
John Wheeler <jwheeler1@gmail.com> wrote:
Thanks, what type of lawyer?
A business lawyer, one who has experience with small businesses and
with LLCs, and who knows a bit about the relevant tax issues too.
-- Mark
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John Wheeler wrote:
Thanks, what type of lawyer?
Uhhh, a "business lawyer" perhaps?
John
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Thank you everyone. The best advice I take away is to hire a lawyer.
Another person told me via e-mail to change my tune from "If you kick
me out, I want..." to, "If you kick me out, I shall have..." That
makes good sense too.
I will research the tax issues.
If you sign a contract in which you give them the
right to do it, why shouldn't they do it?
My worries exactly. I mean, if the millions start flowing in, why does
it make sense to keep a tech geek around when they can hire one as an
employee?
tHanks
John
out
They have already done something shady. They have handed you a
contract containing a clause that says they can vote you out. They
wouldn't have tried that if they didn't think they were dealing with a
babe-in-the-woods. If you sign a contract in which you give them the
right to do it, why shouldn't they do it? Of course they will, as
soon as you contribution to the success of the company is completed.
Will you then argue that they acted immorally by doing what you
voluntarlly give them the right to do?
Obviously, get rid of that clause. It's an unusual clause, even
though they may have told you that it is standard. Most important,
take the contract to a business attorney for review. I expect there
are other clauses that should be explained. There are lots of ways to
cheat a programmer who doesn't have a lawyer.
Naturally, it would be easy to draft a clause which provides for
appraised value payment to a member who gets booted out. That's not
the clause that worry's me. The worrysome clause is the one you
didn't recognize as a problem.
McGyver
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