Can an LLC legally reduce a members interest if they do not pay year-end cash calls?

There are 3 members of the LLC which owns a building. Each member contributed 1/3 towards the formation of the LLC and purchase (downpayment) towards the building. There is NO signed Operating Agreement. At a recent meeting the managing member stated that a member who does not pay year end cash calls will have his interest reduced or eliminated unless he pay the year end cash calls. The managing member stated that there is a MO law regarding this. Can a member’s interest be reduced if they refuse to pay a cash call but believes that the LLC should secure loans to pay debts?

Asked on December 3, 2010 under Business Law, Missouri

Answers:

M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

You need to get some business advice from someone in your area who is familiar with the laws.  But in the meantime I would challenge the managing member and make him or her tell you exactly which law that they are referring to so that you can check the matter out. Thiis way you have the info you need to go back and challenge his or her decision, which you should really have to begin with.  Why should this all be so secretive if you are all equal members of the LLC?  And maybe you should consider sitting down with an attorney and formulating an operating agreement as between all of you as it seems that the way things are running now is not the best.  Good luck to you.


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