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If I have a 50/50 partner in my LLC and they have a specific job title that they are not performing, can that person be fired?

I currently have a business partner that is supposed to be running the front of house and she is barely there. When she is, it is generally chaos and drinks and does nothing. I understand that she will not lose her shares but can she be terminated from her position?

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5

This will depend on the Operating Agreement that you have in place for the LLC. The Operating Agreement is a legal document that outlines the ownership and member duties of your Limited Liability Company. This agreement allows you to set out the financial and working relations among business owners (“members”) and between members and managers.

Of course, hindsight is 20/20, but it's vitally important to clearly define upfront the roles, ownership, finances, and legal formalities to address situations such as this. If you don't have a signed Operating Agreement in place, I would recommend that you sit down with her and have a heart-to-heart conversation on how you guys can move forward together, perhaps better defining the expectations and difference between ownership and operations. Then, when there is mutual alignment, you can put this down in writing.

4

There are two parts to your problem. The first one involves a clear functional description of the responsibilities, duties and performance criteria for each partner. A job title is meaningless without this. Once you have a clear description in place, your partner can be subjected to a performance review. Being a partner does not exclude her from accountability and her salary should be tied to performance. This needs to be reinforced or written into your partnership agreement.

If you have a legally approved partnership agreement, then it should contain some kind of clause that provides a buy/sell option that would put your partner in a precarious position and allow you to take over as 100% owner. Even without such a clause, you can offer to buy her out at some fair market value. You may require an impartial arbitrator for this.

3

Hi Robert,

As the others have said below, if you don't have a partnership agreement that clearly outlines your partner's responsibilities of the business - it is going to be difficult to prove that your partner is violating any terms that are grounds for firing. The Business.com team recently published this guide on 5 Steps to Remove a Shareholder. The guide goes into options for removing a shareholder if there isn't a partnership agreement in place. You'll likely have to talk to a lawyer to thoroughly understand your options.

It sounds like you may not even want to go to the extreme of having your partner give up her shares, just cut back on her level of involvement in the day-to-day operations. If this is the case, to save yourself money and time, you may want to start with voicing your concerns to your partner and see how she feels about being less involved in the daily operations of the business. Find an unbiased third party to be there to help mediate the discussion. Hope this helps!

2

Depends on your "partnership" agreement. If you did not provide for job responsibilities and consequences, it will be tough. Most 50/50 agreements provide a buyout or separation option for either party. If you need a corporate attorney, get one. Sometimes the folks at SCORE (part of SBA) can help.

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