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Dimitry K., Esq.
Dimitry K., Esq., Attorney
Category: Business Law
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Experience:  Run my own successful business/contract law practice.
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We bought 50% of a sole proprietorship in Jan 10, and then

Resolved Question:

We bought 50% of a sole proprietorship in Jan 10, and then transferred asset into LLC. Ownership of LLC is 50/50 and the sole proprietor is named as the "initial manager"

Purchase and transfer agreement states there will be no transfer of liabilities or prior obligations.

sole proprietor now wants the LLC to pay for her debts and say she will close the company if it doesn't...I believe she misrepresented several material facts in the purchase and transfer agreement. Purchase and Transfer agreement states disagreements shall be settled by arbitration, but she acting like the agreements don't exist.

What is the best course of action?

Thank you,
Submitted: 6 years ago.
Category: Business Law
Expert:  Dimitry K., Esq. replied 6 years ago.
Thank you for your question.

Have you threatened her with a possible arbitration claim or with a suit based on misrepresentation, fraud, or breach of contract?
Customer: replied 6 years ago.
yesterday she said she "does not recognize the LLC agreement."

This morning I asked if she is willing to abide by the terms of the purchase and transfer agreement. No response as yet, but my guess is NO.
Customer: replied 6 years ago.
missed the second part of your question. that is where I am headed, just want to get a sense that its the right path.
Expert:  Dimitry K., Esq. replied 6 years ago.
Thank you for your patience.

Unfortunately that is the best and only means of dealing with a stubborn partner. Luckily your agreement specifies arbitration, which will make it a bit easier to pursue a solution to this situation. Whether or not the other party agrees with the agreement is irrelevant here--if she took money as compensation for her 50% share of the business, and did so on terms of that agreement, you can argue that even if she did not sign, she fulfilled the agreement via implication, which still makes the agreement valid. If she signed the agreement, even better--I really do not see valid grounds for her to claim the agreement does not control. So yes, pursuing her via arbitration or via the courts is the best solution here.

Good luck.

Edited by Dimitry Alexander Kaplun on 11/3/2010 at 6:50 PM EST
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