What to do about possible fraud regarding the formation of an LLC?

My husband and I opened a company. After a while, we partnered with another person and divided the shares between the 3 of us. This was all on a verbal agreement; no document was signed. The company was in my husband’s name as sole proprietor. When we decided to incorporate, the third person did all of the paperwork and added a 4th person as owner. I never got to be on the LLC papers. No documents were signed by either my husband or I. Can our partner open the LLC for company that’s not in his name without any signature from the legal owner of the company, my husband? He refuses to show us any paperwork.

Asked on November 24, 2018 under Business Law, New York

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 2 years ago | Contributor

You can't stop him from opening an LLC: but you don't have to be part of it. You did not agree to be part of this 4-person company; he cannot make you be part of it, and your husband will still have his sole proprietorship. Do not transfer any money or assets to this new LLC; and explain to him that unless he agrees to cooperate in removing you from this LLC, you will sue him based on fraud for a court order requiring him to do so and for monetary compensation (e.g. your legal expenses).


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