K-1, does it prove ownership

[sdd]

What is the name of your state? Texas

I worked for a company who promised me 5% ownership of the business. I was told that I "now owned" 5% of that company. The company was an LLC with several partners. When I persisted for documentation proving that I owned a percentage, they simply provided me with a K-1 for that year. This was convenient timing, because it was tax time. My K-1 shows 5% ownership. I left the company a year later and the owner said that my 5 percent would only have been given to me after I worked for them for 5 years. His story changed from originally telling me that I had 5%, to saying that I had 5% that wouldn't have vested until after 5 years. Basically, saying that I didn't have 5%.

I have no other documents other than this K-1, which I "believe" the company filed with the IRS. The company is now selling for 5 million dollars, and I would like to chase 5% of that. Is my K-1 something I can act on, or is it useless? There are no witnesses to prove that I was verbally given 5%. Thank you in advance for your assistance. It is greatly appreciated.

 

[JETX]

Is my K-1 something I can act on, or is it useless?

No one can answer your question with any accuracy without reviewing ALL of the documents and facts. Get a local attorney to review them with you. A potential 250k windfall is certainly worth spending a few hundred dollars for!!!

 

[azatty]

It's proof of ownership of SOME kind of interest, but not necessarily WHAT that interest is.

You can do all sorts of screwy things with interests in limited liability companies. We frequently create several different interest classifications and differing rights. The K-1 simply tells you that profits and losses were allocated to you, but it does not tell you what your relationship is to the company. Because it is a LLC, you may just have a right to receive net income from operations, but none upon dissolution. That theory would be consistent with the presentation of a K-1 detailing profits and losses from operations. But under that theory, you might still get nothing when the company sells.

What you really need to see is the operating agreement and company minutes. There should be some sort of resolution or consent of members to your admission. But Jetx is right--spend a few dollars trying to determine what happened.

 

[clueless3]

The Operating Agreement of the LLC would tell what member has what percentage of the company and under what condition, FOR THAT TIME BEING. The Operating Agreement CAN be modified ON THE FLY (as long as agreed by all current members) to meet the LLC's needs. When you left the company, the OA could have been rewritten. Basically, the LLC is NOT like a Corporation in that, the shareholders ALWAYS know how much of the corporation they own at any given time.

Bottom line: when you leave, it's tough luck! Getting a hold of the OA to review it is not easy.

 

[JETX]

Bottom line: when you leave, it's tough luck! Getting a hold of the OA to review it is not easy.

Bottom line... buy a friggin' calendar. This is ANOTHER post you have put on a FOUR MONTH OLD thread.