Bankruptcy Law Questions? Ask a Bankruptcy Lawyer Now.
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1) Is the company that you and your partner have/had still operational, or not? Was it a corporation, or an LLC, or neither?2) Would this LLC be competing against the prior company?
3) What state is this in?
The fact that he filed a personal bankruptcy really has no bearing on the LLC he partially owns as a silent partner. So this is not an issue.
However, what may be an issue is the breach of fiduciary duty of partners by starting a new LLC that competes in the market. Partners owe each other an inherent duty of LOYALTY. See HERE. Starting an LLC that competes with the existing LLC in which a partner holds interest (silent or not) may be a breach of that.
Unless he agrees to waive this matter in writing and okay it, then this may be a risk as a breach of loyalty may be a basis for a suit.
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So it would be up to him if it would be a problem?
not the trustee of his bankruptcys?
Correct. His personal bankruptcy really does not touch on his interest in the LLC unless his interest in the LLC is somehow part of the bankruptcy.
he wouldnt be conducting business in this industry once his bankruptcy is complete anyways
He has silent interest in the original LLC ("LLC1") that is conducting business and will continue to do so even after his personal bankruptcy ends. Right? So even if he personally is not conducting business in that industry, the LLC1 will be doing so, right? Then as his partner, you cannot start another LLC ("LLC2") that competes with the LLC1 because you owe your partner(s) a duty not to engage in business that hinders your mutually-shared LLC1.
So you would want him to sign a waiver in most circumstances.
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Hello again. This is a courtesy check in to see if you needed anything else in regards ***** ***** question. I am simply touching base. Let me know. Thanks!
This would have to be drafted. Let me know if you need an example.