A Relative Runs the Family Company and Shows You No Numbers: A California Co-Owner's Options
Last updated: November 2026. Reviewed by Pavel Kolmogorov, California business litigation attorney (State Bar No. 321018).
A family business dispute in California is decided by the same rules as any other fight between co-owners. A relative who owns shares or an LLC interest may demand to inspect the books and records and challenge the pay and deals the person in control set for himself. If nothing changes, a suit for dissolution can lead to a court-supervised buyout. The first task is proving what you own, which is harder when little is in writing. (Corp. Code, §§ 1601, 17704.10.) Kolmogorov Law, P.C. represents co-owners of closely held companies in these disputes.
Call (909) 235-6116 or contact us online to discuss a dispute with a relative who co-owns the business.
The family business dispute: one relative runs it and the others wait
Three siblings each hold a third of the company a parent built. One became president. He sets his own salary, employs his spouse, and has not called a meeting or sent a financial statement in years. The other two receive a tax form and no money.
The law treats relatives as it treats any other co-owners. What differs is the evidence: promises made at a kitchen table, loans nobody papered, and habits a parent started. Questions about a will, a trust, or the administration of an estate are outside this page.
Step one: prove what you own
Start with the entity. For a corporation, the stock ledger, the share certificates, and any shareholder agreement are the core documents. For an LLC, look to the operating agreement, the capital account records, and the tax schedules sent to owners. If relatives simply ran a business together and split the profit, the law may treat them as partners; see our page on accidental partnerships.
An LLC interest that changed hands on a member's death needs a close look. A member's death dissociates that member. (Corp. Code, § 17706.02, subd. (f)(1).) The interest is then owned "solely as a transferee," though the deceased member's legal representative may exercise the member's rights for the purpose of settling the estate. (Corp. Code, §§ 17705.04, 17706.03, subds. (a)(3), (c).) A transferee shares in distributions but does not vote or take part in management. (Corp. Code, § 17705.02, subds. (a)(3), (b).) Where other members remain, a person generally becomes a member only as the operating agreement provides or with the consent of all members. (Corp. Code, § 17704.01, subd. (c)(1), (3).) Depending on the agreement, the holder can have a share of the money and no vote.
Step two: get the numbers
A shareholder may inspect the accounting books, records, and minutes on written demand, for a purpose reasonably related to the holder's interests as a shareholder. The articles and bylaws cannot limit that right. (Corp. Code, § 1601, subds. (a), (b).)
A relative who sits on the board has more. Every director has "the absolute right at any reasonable time" to inspect and copy all books, records, and documents of every kind. (Corp. Code, § 1602.)
In an LLC, each member and transferee may inspect the required records and obtain the company's tax returns for a purpose reasonably related to that person's interest. A waiver of those rights is unenforceable. If the company refuses without justification, the court may award the requester's reasonable expenses, including attorney's fees. (Corp. Code, § 17704.10, subds. (b), (g), (h).) Our page on being locked out of an LLC covers the demand letter.
Step three: test the pay and the insider deals
Control carries duties. The California Supreme Court has held that majority shareholders owe a fiduciary duty to the minority and to the corporation to use their control fairly. They may not use it to benefit themselves alone or in a manner detrimental to the minority. (Jones v. H.F. Ahmanson & Co. (1969) 1 Cal.3d 93.)
For a corporation's deal with its own director, or with a business in which the director has a material financial interest, the statute sets a test. Unless disinterested shareholders or a disinterested board vote approved the deal in good faith after full disclosure, the person defending it must prove it was just and reasonable to the corporation when approved. Board approval, unlike shareholder approval, protects the deal only if it was also just and reasonable to the corporation. (Corp. Code, § 310, subd. (a).) A relative who signed both sides of a lease or loan, with no such approval, carries that burden.
LLC managers, and members of a member-managed LLC, must account to the company for any benefit they derive from its property and must not deal with it on behalf of an adverse interest. (Corp. Code, § 17704.09, subds. (b), (f).) Our page on self-dealing goes deeper.
Step four: choose between a seat, a sale, and a suit
A minority vote still counts. If the corporation has stopped holding elections, a court can order one, as explained on our page about court-ordered shareholder meetings.
Shareholders holding at least one-third of the shares, or any shareholder of a statutory close corporation, may sue for involuntary dissolution. The grounds include persistent unfairness toward any shareholders and, in a corporation with 35 or fewer shareholders, liquidation reasonably necessary to protect the complaining shareholder. (Corp. Code, § 1800, subds. (a)(2), (b)(4), (b)(5).) Unless the articles provide otherwise, the corporation or, if it declines, the holders of at least half the voting power may avoid dissolution by buying the plaintiff's shares for cash at fair value. (Corp. Code, § 2000, subd. (a).)
LLC members have a parallel suit, and the other members may buy the plaintiff out at fair market value. (Corp. Code, § 17707.03, subds. (b), (c)(1).) Do not resign from an LLC to force the issue; our page on LLC member withdrawal explains why.
Where the proof comes from in a family company
When little was written down, the record has to be rebuilt. Company tax returns show who was treated as an owner and in what percentage. Bank statements and payroll records show who was paid and how much. The outside accountant's file may hold the only ownership schedule anyone prepared.
Preserve texts and emails, including the unflattering ones. Waiting out of family loyalty is risky, because limitation periods can run in the meantime.
If you are the relative who runs the company
The risk lies in pay and deals nobody else approved. Disclose the terms, put conflicted transactions to the owners who have no stake in them, and keep the approval in writing. Answer a proper records demand on time. An offer to buy out a dissatisfied relative at a supportable value is an alternative to defending a dissolution suit.
What to bring to the first meeting
Bring whatever shows ownership: certificates, the operating or shareholder agreement, and the tax schedules you received. Add any financial statements, the messages in which you asked for information, and the replies.
Frequently asked questions
My brother runs the family company, pays himself whatever he wants, and shows me no numbers. What rights do I have as a co-owner?
In California you have the rights of any shareholder or LLC member. You may demand to inspect the books and records, and an LLC member may obtain the tax returns. You may challenge self-dealing and unfair use of control as a breach of fiduciary duty. If the conduct persists, a dissolution suit can lead to a buyout of your interest.
Can I sue a family member over a family business in California?
Yes. California law gives a co-owner the same claims against a relative as against anyone else. They include breach of fiduciary duty, breach of the operating or shareholder agreement, enforcement of inspection rights, and a suit for dissolution. None of the statutes behind those claims makes an exception for relatives.
I inherited part of my father's LLC, but my sister says I have no vote. Is she right?
She may be. Under California Corporations Code sections 17706.02 and 17706.03, a member's death dissociates the member, and the interest is then owned as a transferee's interest, which carries distributions but no vote. Where other members remain, a person generally becomes a member only as the operating agreement provides or with the consent of all members. While the estate is being settled, its legal representative may exercise the member's rights for that purpose. Read the operating agreement first.
Can a minority owner force a buyout of a family business?
Not directly, but a dissolution suit creates the path. In a California corporation, section 2000 of the Corporations Code lets the company or, if it declines, the holders of at least half the voting power avoid dissolution by buying the plaintiff's shares at fair value. The articles may provide otherwise. In an LLC, the other members may buy at fair market value under section 17707.03.
Do relatives who co-own a company owe each other fiduciary duties?
In a company, the duties come from control and position. In California, majority shareholders owe a fiduciary duty to the minority to use their control fairly, and directors and LLC managers owe duties of loyalty and care to the company. So does each member of a member-managed LLC. A passive minority shareholder, or a member of a manager-managed LLC who is not a manager, generally does not owe those duties.
Talk to a California business dispute attorney
To discuss a dispute among relatives who co-own a company, call (909) 235-6116 or contact us online. Kolmogorov Law, P.C. is a business litigation firm in Irvine, California. Related pages: partnership and LLC disputes, minority shareholder rights, and self-dealing.
This page provides general information about California law and is not legal advice. Outcomes depend on the ownership documents, the facts, and the court.