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16 members to form an partnership LLC to invest on real estate property. The general partner took all property .
Anonymous7 views7 answers
We have 16 members to form an partnership LLC in 2007 to invest on real estate property. We collected 1.8 millions cash to buy 3 lots with 5 houses on the land. One of the general partner registered all the property under his own name. He is not willing to return the property to LLC; and he claimed the LLC keep losing money and our assets becomes negative. However, he owns all the title of the 3 lots. Can we sue him? Can we file the suit to SEC? The LLC pays all expenses, he owns the title.
Ronald David WiltonEmployment / Labor AttorneyEncino, CA ·
Yes, a member can be sued by the LLC for misappropriating LLC funds. No, this has nothing to do with the SEC since the LLC was privately held. The LLC should retain an attorney to handle this as it is likely to be quite complicated.
You can sue the member for fraud, breach of contract, breach of fiduciary duties, and related claims. The SEC would not be involved here.
A full consultation would be necessary to properly advise you.
Of course you can sue him, and his nonsense answer about the properties losing money is ludicrous. You should not delay, not threaten, but proceed immediately to protect your rights. Hopefully the transfer to himself took place later than 2007.
In addition to my colleague's answers, depending on what documents were drawn up when the LLC was created the SEC may be able to sue your "general partner" for selling unregistered securities without a proper offering document - but the SEC's action would not help you recover the properties. If any of you invested additional monies within the past four years, you may be able to sue under securities laws in addition to the more obvious claims.
Please consult an experienced attorney. It is possible that this is also a securities issue. Many small real estate "partnerships" and LLC's in california violate the securities rules depending on the structure and conduct of the members if the deal has not been permitted by the california department of corporations.
You should heed the comments here and hire counsel immediately to enforce your rights in an appropriate court. However, the securities regulators may well be interested in hearing about what happened, as the misappropriation of funds in these circumstances is often violative of state and federal securities laws. The regulators will not in most instances get your money back. But in the case of the SEC, the submission of a Dodd-Frank whistleblower complaint can get you 20% of the fine the SEC collects. You should only submit such complaints with the assistance of counsel.
