What to do regarding distributions between managers of an LLC?
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What to do regarding distributions between managers of an LLC?
We have an LLC that flips houses. The partnership is with my cousin who is not a resident in the U.S. and who lives overseas. The initial contribution was 50/50 but then I ended up putting all the work/services and with a lot more contribution than him in order to make business work. I asked him to contribute more capital but he did not. We did a basic operating agreement when it all started and does not specify anything. However, when it comes to distribution, how would this work as he only put a small amount of money, did nothing and I contributed with much more money? Now he wants half of everything even the money that I put in. Doesn’t my ownership change because I put way more capital
than he did?
Asked on August 3, 2017 under Business Law, Florida
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 6 years ago | Contributor
No, putting in more capital *after* the LLC is set up does not increase your ownership percentage unless and only if you amended the operating agreement to increase your (and decrease his) ownership. Otherwise, the initial determination of a 50/50 ownership will stand (and, unless and until formally amended in writing) and he is entitled to 50% of any distributions.
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