LLC Accounting Rights: Lessons from S&H Nadlan, LLC v. MLK Associates LLC

When you join a limited liability company (LLC) as a member—especially a minority member—your ability to monitor how the company is being run often depends on one crucial protection: the right to access books, records, and accounting information. A 2016 New York Supreme Court case, S&H Nadlan, LLC v. MLK Associates LLC, provides an important roadmap of what those rights look like and how courts enforce them. ​​

The Case in a Nutshell

The plaintiffs in S&H Nadlan were minority members of two LLCs that owned real estate assets. Management of the LLCs was handled by one of the defendants. When the minority members requested access to books, records, and financial information—including formal accountings—the defendants refused to provide access unless the members agreed to a confidentiality agreement that also prohibited them from contacting other LLC members. The minority members refused to accept these additional restrictions and sued to enforce their statutory and equitable rights.

The court ruled decisively in favor of the plaintiffs, providing an instructive affirmation of members’ rights under New York LLC law.

Right #1: Statutory Access to Books and Records

New York’s Limited Liability Company Law (LLCL §1102) gives every LLC member the right to inspect certain core documents, including:

• A current list of members and their addresses.

• Each member’s contribution and share of profits/losses.

• The articles of organization and operating agreement.

• The company's tax returns for the last three fiscal years.

Under §1102(b), members may inspect these at their own expense for any purpose reasonably related to their interest as members and may request additional financial information that is “just and reasonable.”

In S&H Nadlan, the defendants admitted that the plaintiffs had a statutory right to inspect the LLCs’ books and records. Without any evidence of applicable limitations in an operating agreement, the court ordered full access. ​

Right #2: Reasonable Standards… But Not Unlimited Restrictions

LLCL §1102(c) allows an operating agreement to impose reasonable confidentiality restrictions, but only in specific circumstances—for example, to protect trade secrets or sensitive information.

In this case, the defendants demanded that the minority members agree not to contact any other members of the LLC as a condition of receiving access. The court rejected this restriction because:

• Defendants cited no operating agreement provision authorizing such limitations.

• Defendants’ justification—that the members might solicit others for investment opportunities—was purely speculative.

• LLCL §1102 does not allow management to block communications between members absent express authority. ​

The ruling reinforces an important principle:

Managers cannot create new barriers to transparency that are not authorized by the operating agreement or statute.

Right #3: The Right to an Accounting

Beyond record‑inspection rights, LLC members may also be entitled to a formal accounting, especially when financial transparency is withheld. Courts recognize an equitable common‑law right among LLC members to obtain an accounting because of the fiduciary relationship inherent in co‑ownership.

The court in S&H Nadlan held that:

• Minority members are entitled to an accounting as a matter of law.

• Defendants had not contested this right.

• Accountings were therefore ordered for both LLCs. ​[SAndH Nadl...ciates LLC | PDF]​

This underscores that access to books and records is not always enough—members can also demand a full financial reckoning when necessary.

What This Case Means for LLC Members

The S&H Nadlan decision confirms several key protections for members of New York LLCs:

1. Transparency is a statutory right.

Members do not need to justify why they want records beyond showing a reasonable connection to their membership interest.

2. Restrictions must be grounded in the operating agreement.

Managers cannot impose unilateral confidentiality rules or block member‑to‑member communication unless the operating agreement explicitly allows it.

3. Accountings are available when information is withheld.

If management resists transparency, courts will compel both inspection and accounting.

4. Minority members have enforceable rights.

Even when they lack management authority, minority members retain meaningful oversight tools.

Takeaway

If you're an LLC member—especially one without management control—S&H Nadlan v. MLK Associates LLC serves as a potent reminder: you have the right to know what is happening inside the company you co‑own. Books and records access is not a courtesy; it’s a legal entitlement. And when transparency is blocked, courts stand ready to enforce it.