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Irwin Law
Irwin Law, Attorney
Category: Legal
Satisfied Customers: 6845
Experience:  Lawyer & Real Estate Broker, 30+ years, foreclosure, land contracts, inheritance, probate.
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I am 50/50 partners in an s-corp. We are in a financial mess

Customer Question

I am 50/50 partners in an s-corp. We are in a financial mess which has greatly reduced or incoming revenue. My partner wants to continue to tap into our business line of credit. I do not. It is in the business name however we personally guaranteed the loan. Can I stop him from dipping into it? Is there a legal document I can make him sign to protect myself?
Submitted: 2 months ago.
Category: Legal
Expert:  Irwin Law replied 2 months ago.

Good morning and thanks for using Just Answer. First of all, if 50-50 partners disagree on a major operating factor, then the Corporation is considered deadlocked. In a deadlock situation, the partner can no longer take action which binds the Corporation; however, that is little use if he goes ahead and does it without authority. Therefore, in order to protect yourself, you must notify the creditor who is extending the line of credit that the Corporation officer (the other guy) no longer has authority to bind the Corporation or you as guarantor with regard to any further advances against the existing line of credit. While I cannot give you a clear legal opinion on the effect of such notification without spending a great deal of additional time and effort in legal research, I can tell you that you will be much better off with having given the notice than you would be not having given it.

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Expert:  Irwin Law replied 2 months ago.

You Also asked:

Is there a legal document I can make him sign to protect myself?

You could have a lawyer prepare a "hold harmless" agreement for him to sign in which he agrees to indemnify you against any loss or damage by virtue of suits brought by the creditor based upon your loan guarantee. But is that agreement going to be worth anything if and when it becomes necessary to use it.

Expert:  Irwin Law replied 2 months ago.

Hello again. I hope that I have provided excellent service and, if so, would love a 5 star rating. If not, please let me know how I can further assist you. There is no additional charge to you for rating me. A bonus is not required, but is always appreciated.

Thanks again for using JUST ANSWER.

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