Member DisputeMember disputes occur whenever their are disputes between the members of an LLC. While member disputes are quite similar to partnership disputes, it is important to note that membership disputes occur exclusively within the limited liability company  business structure.  In spite of their similarities, it is important to remember that no member dispute is quite like any partnership dispute, so each member dispute should be addressed with individual care and attention.

Reasons for Disputes

One of the most popular reason for a dispute is disagreement about profit distribution. The successful formation of an LLC usually requires members to take leadership for varying fields, such as management, sales, business operations or employment services. It is not uncommon for members in differing areas to believe that they are contributing more than other members and should receive a greater percentage of the profits in return. On top of this sentiment, it is also quite difficult for a member in one department to measure the job performance of a member in a separate department.

Profit distribution will usually be predetermined and outlined in an operating agreement, however, as roles and responsibilities change over time, some members may be adamant about altering the payment agreement while other members can be reluctant. Profit distribution disagreements are not always a signal of internal antagonism, as it is natural for the member dynamics to change over time and necessitate reevaluations of member payments. Companies will sometimes grow and take on new members and investors and other times companies may restructure their business and divorce some members. It is important that any professional or business that foresees an LLC formation in the future to be aware of the likelihood that conflict will arise. Member disputes will only become a harbinger of failure for businesses that deny the need to seek counsel.