Alfie and Bruce went to college together and graduated in business management. Believing they could make it on their own they formed an LLC to create a hip clothing store, each owning and managing the store 50/50. As is typical, Alfie and Bruce being best of friends and not wanting to hire an attorney, either did not have a partnership agreement (operating agreement) or used a template off of the internet. As oftentimes occurs, things started off well — but after a year Alfie and Bruce were not able to keep up with the fashion industry, sales declined and costs mounted; Alfie seized the bank accounts, the website, and cut off all of Bruce’s communications with suppliers and customers, believing that the business would succeed without Bruce. Because Alfie and Bruce did not plan for dissent or deadlock they may be subject to some unsavory results – dissolution or expulsion. Can Bruce do anything?

The short answer is yes. Under the Revised Uniform Limited Liability Company Act, Bruce has recourse. If there are other partners, he can seek unanimous consent of the others to expel his partner if the member is “engaged in, or is engaging, in conduct relating to the company’s activities which makes it not reasonably practicable to carry on the activities with the person as a member.” See DC Code § 29-806.02(5)(C). If unable to secure unanimous consent, one can sue to have the unruly member(s) judicially expelled. The language of the statute is quite broad allowing a judge to expel a member in many circumstances not contemplated by the parties. However, the expelled member is still entitled to their economic benefits both if expelled by a judge or the other members.

There is yet another alternative. For example, under DC Code § 29-807.01(a)(4)(B), unhappy members can bring a lawsuit for dissolution where “it is not reasonably practicable to carry on the business in conformity with the articles of organization and the operating agreement.” The language “not reasonably practicable” could be interpreted broadly allowing for a judge to dissolve the LLC in circumstances not intended by the parties to lead to dissolution.

Although Alfie and Bruce would have benefited from having a mechanism for solving deadlock in the operating agreement, the Courts don’t force business partners to be forever married and does offer the judicial “out.” RANDY ALAN WEISS of WEISS LLP has significant experience in the drafting and enforcing of LLC agreements in DC, Maryland, Virginia and Florida. Among his many suggestions are: ensure that deadlock is avoided by alternative remedies; restrict legal action in order to preserve the value of the business, ensure that frivolous matters do not end up blowing up a business and, moreover, ensuring that the minority can never upset the majority. Long and short, an operating agreement in and of itself is never enough without providing for cases of dissent and deadlock.