Slate’s Law Blog

How are Disputes Between LLC Members Resolved?

How are Disputes Between LLC Members Resolved?

LLCs (limited liability companies) are popular business entities because of the limited personal liability they offer. But disputes between LLC members can arise, which may eventually lead to costly and time-consuming litigation. However, litigation is not the only option to resolve disputes between LLC members.

It is important to know how to proactively address potential disputes before they escalate into something more serious. Below, we will discuss some of the most common causes of LLC member disputes, as well as the best methods for resolving them.

If you are a member of an LLC and are in the midst of a dispute with other members, contact our Santa Fe business litigation lawyers at Slate Stern Law to assess your particular situation and determine the best way to resolve your dispute.

Common Causes of Disputes Between LLC Members

First of all, let’s define who an LLC member is according to New Mexico law. Under New Mexico Statutes § 53-19-2, a member is a person admitted to LLC membership and has not dissociated from that company.

Disputes among LLC members typically arise over issues such as management authority, compensation and distributions, decisions regarding major investments or changes in the business structure, or breach of fiduciary duties. These disputes often lead to arguments about how funds are managed and spent, who has control over certain aspects of the business, and how profits should be distributed among members.

Methods for Resolving LLC Member Disputes

When LLC members are having a dispute about control of operations, profit distributions, job performance, or any other reasons, it is important to know the methods for resolving the dispute:

  1. Negotiation. The first step in resolving any dispute usually involves negotiation between the parties involved. Negotiations should be conducted in good faith with the aim of finding a mutually beneficial resolution that is acceptable to all parties involved. Each party should be open-minded and willing to compromise on issues where necessary in order to reach an agreement that works for everyone. 
  2. Mediation or arbitration. If negotiations fail to produce a satisfactory outcome, mediation or arbitration may be necessary. Mediation involves an impartial third-party mediator who helps facilitate communication between both parties and encourages them to reach a reasonable settlement agreement without going through formal legal proceedings. Arbitration requires both parties to present their respective cases before an impartial arbitrator who will make a binding decision on behalf of all parties based on the evidence presented by each side.
  3. Litigation. When other options have been exhausted, and no agreement can be reached between LLC members through negotiation or mediation/arbitration, litigation may become necessary to resolve the LLC member dispute. Litigation is expensive and time-consuming, but it may be necessary if there is no other way forward for one of the parties involved in the dispute or if substantial damages are at stake.

At Slate Stern Law, our lawyers have extensive experience and unparalleled success with all three methods for resolving disputes between LLC members.

Learn About Your Options for Resolving the LLC Member Dispute

No one wants disputes between LLC members, but they can happen regardless of how carefully you plan or how diligent you are when setting up your company structure. If you are facing a dispute with another member of your LLC, do not hesitate to contact Slate Stern Law.

Our lawyers can help guide you through the process of finding an appropriate resolution for your situation. Schedule a confidential consultation today to discuss the most effective and cost-efficient method for resolving the LLC member dispute in your particular case. Call (505) 814-1517 today.