Business Formation and Structure

We’re often asked, why do I need a member control agreement (in the case of an LLC) or a shareholder agreement or operating agreement (in the case of an C or S Corporation)? After all, if you pay the fee and to create a new business with the Minnesota Secretary of State’s office, the state will automatically generate LLC or Corporate documents for you. This is enough to present to the bank to open a business account, or to get an FEIN with the federal government. So why does even the Secretary of State’s office recommend that existing LLCs contact their attorneys to review their organizational structures? The reality is that if you start a business without formation documents crafted to your specific business and the relationship between you and your business partners, your rights with respect to your fellow members and to third-parties like creditors or business affiliates will be governed by the Minnesota Revised Uniform Limited Liability Company Act  or the Minnesota Business Corporations Act. Neither of these Acts are tailored to your specific business relationships and objectives.

Here are just a few examples of why that is. Under Minnesota’s LLC Act enacted in 2017, and effective January 1, 2018, the default rule is that distributions of cash or other assets to the members is made on a per-capita basis, meaning, equal to the shares of each eligible member. With respect to voting, the default rule is now that members will have equal voting rights regardless of the amount of their capital contribution. The 2017 amendments provide greater flexibility for members to limit or modify their fiduciary obligations to one another. So if members seek to limit their ability to engage in other business ventures outside of their LLC, this is something that must be set forth in the operating documents. As another example, the new LLC Act provides a member with the ability to dissociate from the LLC at any time, rightfully or wrongfully, and similarly, the LLC has the power to kick a member out at any time, also rightfully or wrongfully. See Minn. Stat. § 322C.0602. Do you have a right at that point to receive your fair value for your membership interests? If you don’t have an agreement setting forth what occurs, you’ll have to defer to the LLC Act, which is going to be more time-consuming and expensive than looking at your own membership documents – hopefully you have them in place.

Shareholder or LLC Member Litigation

We have in the past, and continue to, represent business equity-holders who are being pushed out of their businesses for the wrong reasons, or whose fellow shareholders or LLC members refuse to give them fair value for their membership interest in the business. We know the avenues to put you or your company (depends who we’re representing) in the best position to maximize or minimize the value of your position. We might require a valuation, or it might be preferable to bring the matter into court. We have the experience and acumen to help you put your best foot forward if this situation arises for you or your business.

General Outside Counsel

Growing and established businesses and startups often benefit from having a seasoned business attorney at their side to address issues that frequently arise. Some issues you might be facing where we can help include, but aren’t limited to, creating employee stock option plans; establishing plans for phantom shares or share vesting (including membership units in the case of limited liability companies); compliance with state and federal medical leave or anti-discrimination laws; collecting on monies owed by third-parties; employee retention plans; managing employee expectations; and resolving or litigating disputes with business that owe you money or are suing your business for breach of contract.