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socrateaser
socrateaser, Attorney
Category: Business Law
Satisfied Customers: 33504
Experience:  Retired (mostly)
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BACKGROUND of QUESTION: We have a LLC... their were three original

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BACKGROUND of QUESTION: We have a LLC... their were three original managing agents of the LLC... one was voted off of the LLC when it was discovered he paid himself monies from the LLC without our approval. When he said he had a right to pay himself back for monies he put into the company we told him he could not do that without us accepting and knowing. When he refused to accept the fact that he was wrong in protecting the company/LLC this is when he was voted off and removed both from the LLC and from the bank account. We are now considering closing out the business/LLC because we are going more and more into debt and it is killing us. We just want to sell off the furniture use the money to pay off the debt... If there is any money left distribute to the 3 of us per our % in the business. We understand how we have to close the LLC however there is one detail we are confused about.

THAT IS THIS: When we first began this business (less than a year ago) one of the partners, registering agent and managing agent of the LLC placed the lease in her name... and her name only. How do we handle the lease? Is she personally responsible for the lease? Does she have a right to close it out the lease if she is on the LLC? Do we have to take her off the LLC before she can do that? Or is it best we assign the lease to the LLC... we just never thought about it before because we just didn't think about it. She is also the stylist of the salon and holds the business license of the salon... what is the correct way to handle this?

Optional Information:
State/Country relating to Question: Florida
Submitted: 3 years ago.
Category: Business Law
Expert:  socrateaser replied 3 years ago.
How do we handle the lease?

A: The equitable/fair approach would be for the partners who did not personally guarantee the lease to sign an agreement consenting to indemnify the partner who personally guaranteed the lease. However, there is no legal requirement that the other partners do this. The partner who made the personal guarantee would have to sue the non-guaranteeing partners to obtain a court order of equitable indemnity. Which may be more expensive than its worth -- but it could happen if the landlord sues the guaranteeing partner for the unpaid lease balance.

Is she personally responsible for the lease?

A: Yes. See above.

Does she have a right to close it out the lease if she is on the LLC?

A: She can terminate the lease, but she will remain liable for the unpaid balance. See above.

Do we have to take her off the LLC before she can do that?

A: No.

Or is it best we assign the lease to the LLC... we just never thought about it before because we just didn't think about it. She is also the stylist of the salon and holds the business license of the salon... what is the correct way to handle this?

A: The only way that you can protect the guaranteeing partner is to personally agree in writing to indemnify her for any losses sustained as a result of the landlord suing to collect the unpaid lease balance upon default on the lease payments.

If the guaranteeing partner is in a position to file bankruptcy, then that would resolve everyone's problem. But, that's an entirely different question -- one that only the guaranteeing partner can decide for herself.

Hope this helps.

socrateaser, Attorney
Category: Business Law
Satisfied Customers: 33504
Experience: Retired (mostly)
socrateaser and 9 other Business Law Specialists are ready to help you
Customer: replied 3 years ago.
BACKGROUND of QUESTION: We have a LLC... their were three original managing agents of the LLC... one was voted off of the LLC when it was discovered he paid himself monies from the LLC without our approval. When he said he had a right to pay himself back for monies he put into the company we told him he could not do that without us accepting and knowing. When he refused to accept the fact that he was wrong in protecting the company/LLC this is when he was voted off and removed both from the LLC and from the bank account. We are now considering closing out the business/LLC because we are going more and more into debt and it is killing us. We just want to sell off the furniture use the money to pay off the debt... If there is any money left distribute to the 3 of us per our % in the business. We understand how we have to close the LLC however there is one detail we are confused about.

QUESTION: Since the other managing agent was removed from the LLC do to his illegal action( not his 20% ownership) ... and it is only myself (a managing agent of the LLC and 60% share holder in the company) and the other 20% share holder of the company - also the registering agent and managing agent of the LLC and holder of the business license and lease, consent to indemnify her since she personally guaranteed the lease. As the only agent of the LLC, beside her, can she agree and vote to indemnify herself or can I only have do that? If I do that does the corporation then become responsible for the lease?
Customer: replied 3 years ago.
QUESTION: Since the other managing agent was removed from the LLC do to his illegal action( not his 20% ownership) ... and it is only myself (a managing agent of the LLC and 60% share holder in the company) and the other 20% share holder of the company - also the registering agent and managing agent of the LLC and holder of the business license and lease, consent to indemnify her since she personally guaranteed the lease. As the only agent of the LLC, beside her, can she agree and vote to indemnify herself or can I only have do that? If I do that does the corporation then become responsible for the lease?
Expert:  socrateaser replied 3 years ago.
FYI: You are asking an entirely new question and you will incur a new charge. I hope this is what you are expecting. Your new question:

Since the other managing agent was removed from the LLC do to his illegal action( not his 20% ownership) ... and it is only myself (a managing agent of the LLC and 60% share holder in the company) and the other 20% share holder of the company - also the registering agent and managing agent of the LLC and holder of the business license and lease, consent to indemnify her since she personally guaranteed the lease. As the only agent of the LLC, beside her, can she agree and vote to indemnify herself or can I only have do that? If I do that does the corporation then become responsible for the lease?

A: First of all, unless your operating agreement permits it, a majority of LLC members cannot simply vote a member out of the LLC. So, if you don't have an operating agreement, then your vote cannot impair the minority shareholder's interests in the LLC. The only way to get rid of a member is with that member's consent, or through a court action to dissolve the LLC. That said, an agreement to personally indemnify a partner is personal! Each partner must decide for themselves. It has nothing to do with the LLC, because even if the LLC agreed by vote to indemnify the partner, if the LLC is dissolved, then that agreement is also dissolved, and what is left is the original partner with her personal guarantee.

So, if you really want to indemnify this partner, then you and/or the other partner will have to personally enter into an agreement with the guaranteeing partner to accomplish this goal.

Hope this helps.

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