Are you concerned about an LLC profit or distribution dispute in San Diego or anywhere in California? If you are a member in a San Diego LLC and you are concerned about the distributions taken by another member or the amount you have recently received from your company, you should take immediate action to protect your interests.
3 Key Takeaways for an LLC Profit or Distribution Dispute in San Diego:
- A dispute over money or the distribution of profits between the members (owners) in an LLC is one of the most common issues we help owners of small companies to deal with.
- The primary questions are ‘what is owed and why,’ and ‘what is the best way to resolve this dispute, while protecting the company and the integrity of the LLC itself?’
- What are the responsibilities of each member? How has the business changed, and what are the natural skill sets of each member in your LLC? Is it time to restructure the relationship between owners, buy out a member, or to bring in new investment or business acumen?
Disputes Over an LLC Profit or Distribution
An LLC profit or distribution dispute in San Diego or anywhere in California happen all the time. The controlling contract in these disputes is usually the operating agreement for the LLC. In the absence of an operating agreement, or if the terms of that contract are vague (such as is the case in downloaded forms), California laws are written to protect the interests of the minority member, and unless your operating agreement specifically says otherwise those laws will govern the dispute. This important document should clearly answer questions regarding the responsibility of each member of the LLC, as well as what to do if someone isn’t upholding their responsibilities, or how to bring in new skilled partners or investors. Unfortunately, in many cases the operating agreement is still in “boilerplate,” and this will make any resulting dispute much more challenging to efficiently resolve.
How is an LLC Distribution Dispute in San Diego Usually Resolved?
The Watkins Firm has helped to resolve LLC distribution disputes for almost four decades. An LLC distribution dispute in San Diego and Southern California is usually resolved by your Watkins Firm attorney in a timely and cost-effective manner. The majority of LLC distribution disputes are resolved by our attorneys through leveraged negotiation based upon a thorough, well documented chronology of events, and a mastery of any available damages. When necessary, we represent our clients in mediation or arbitration to protect their interests and accomplish their goals and objectives.
What Are the Most Common LLC Distribution Disputes Based Upon?
The most common LLC profit or distribution dispute in San Diego or anywhere in California is based upon questions regarding how and when members are to receive compensation, how the company distributes profits and the “double-dipping” of a member who is also an employee or executive of the company. In other cases, these disputes are based upon deception, fraud, theft, commingling or misappropriation of company monies. If you are concerned about fraud or the misappropriation of funds by a fellow member or any other LLC distribution issue you will need the advice and representation of our experienced business attorneys. The burden of proof in these cases is quite high and often requires skilled investigation as well as forensic accounting.
Pro-Tip: “What are some of the most common things that might lead to a dispute between members of an LLC or shareholders?
Well, there’s a lot of things. They are going to be in disagreement over and very widely. But one universal thing we found after almost 40 years of doing it is once the company starts making money, people will naturally rationalize their position to allow them to make a larger share of that money. Right? Once it starts making money it’s worth fighting over.
We want to get the facts down and we want the evidence they have in chronological order, because that’s the best way to communicate to the other party, to a third party, to anyone is in chronological order. That’s how we think. Then I want to help our clients analyze the damages. Whether you are feeling like they owe you something, they’re not complying with the agreement or vice versa. So I want to want something more from you than just to analyze the damages, we need to analyze what it’s going to cost to fight. And also look at the future business, and whether we can and should salvage this relationship, all of those important things should come into play. We want to help solve your problems, and give good advice.
Knowing the facts, the damages, the law of the damages is key, because that gives your lawyer the ability to predict what would happen if you went to trial tomorrow and you won, what would you win? That’s it, that’s the number. Because in civil court, we’re only considering dollar amounts, and getting to an agreement, and understanding human nature. That’s another thing, right? Preparation for my clients has to do with the law, and damages, and the facts, getting all the facts down in chronological order and thoroughly documenting them.
If you’re going to stay in business with each other, then you’re going to want additional clauses and assurances that this thing won’t happen again, you’re going to want to give some kind of compensation or power, change the structure, do something to improve the situation. Those things we can handle because we have a transaction team here too. So when we acquire business, we’re already putting those kinds of clauses in. So you might be in a business dispute with a partner because you didn’t have those types of clauses in your operating agreement to begin with. And perhaps the resolution of your lawsuit will be having proper paperwork to go forward.” – Dan Watkins, Founding Partner
Proven Business Attorneys for San Diego Small and Mid-Size Businesses
At the Watkins Firm, we have served members of LLCs and the San Diego business community for almost four decades. We have helped to resolve scores of contract disputes, and disputes between members in LLCs. We can help to efficiently your LLC profit or distribution dispute in San Diego or anywhere in California. The behavior associated with inaccurate distributions, inappropriate withdrawals or disbursements will continue in all likelihood. If you are concerned about how the money in your LLC is being handled, we invite you to review our podcast Episode 11 – Resolving Business Disputes as well as the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today. We’ll review your legal position, the condition of your corporate documents and provide sound advice to protect your personal interests and those of your company.
Meet Daniel Watkins:
Daniel W. Watkins is a true people person who sincerely listens. He cares deeply about what others are going through. Dan enjoys digging into the facts and finding creative solutions to problems. He contributes his insights candidly and constructively.
Dan’s interest in people make him deeply invested in every relationship and his exuberant personality makes him a true litigator. Dan fights for his clients with a fierce and calculated commitment.
Dan has practiced in the areas of business, medical practices and healthcare business, high tech/science, real estate and employment defense law since 1987. He is a trusted litigation strategist and true trial attorney with over 50 jury and bench trials to his credit. Dan has successfully represented both large companies and individuals and achieved substantial victories in well-publicized trials throughout California and the U.S.
He is experienced in business and corporate formation and administration, as well as all forms of alternative dispute resolution, including binding arbitration and mediation.
THE ROAD TO BECOMING A BUSINESS LAWYER AND LITIGATOR
Dan has almost 40 years of experience working with, for and against some of the largest insurance companies in the country. He has successfully tried and litigated cases in the areas of Healthcare Compliance, Commercial Litigation, Unfair Business Practices, Fraud, Breach of Contract, Battery, Premises Liability, Product Defect, Medical Malpractice, Discrimination, Sexual Harassment, Construction Defect, as well as Unfair Competition, Defamation, and Trade Secrets.
In December 2003, Dan commenced litigation against Health South Surgery Centers-West, Inc and its’ subsidiaries, exposing the company’s extensive mismanagement and misconduct of its’ surgery centers. Dan has also been asked by some of California’s largest municipalities and corporations to conduct legally required investigations into matters involving alleged employment discrimination and harassment.
