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Can judgment against an RI LLC member be charged to business? The…

Customer Question
Can judgment against an RI...
Can judgment against an RI LLC member be charged to business?
The business is not doing well - any forced action would result in liqudation.
The member with judgment is 59% shareholder that is not active in the business.
Submitted: 6 years ago.Category: Business Law
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3/6/2012
Business Lawyer: Richard, Attorney replied 6 years ago
Richard
Richard, Attorney
Category: Business Law
Satisfied Customers: 57,225
Experience: 32 years of experience practicing law and a businessman.
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Good morning. A judgment against the member cannot be enforced against the LLC itself. But the judgment creditor can take the member's interest in the LLC....and the 59% ownership would entitle the judgment creditor to control the LLC unless the Operating Agreement for the LLC provided for a higher vote for decisions or the LLC has specific provisions entitling the other members to purchase this interest or limited the new member to "assignee" status.

 

 

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Please be aware that the information provided here is not legal advice. Rather it is simply general information. All states have intricacies in their laws and any information given is simply information only and specifically is not intended to be, nor does it constitute, legal advice. This communication does not establish an attorney-client relationship with you. I hope this answer has been helpful to you.

 

 

Richard
Richard, Attorney
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Customer reply replied 6 years ago

We are attempting to dissolve an LLC with 6 members and transfer or sell to 2 of the members (I am one) the assets in exchange for assuming debt.

 

The Operating Agreement states "Events of Dissolution. The Company shall be dissolved upon the happening of any of the following events: 7.1.1. Upon the written consent of a majority of the Percentages held by the Members; or"

 

5 partners have signed off representing 93% of ownership. This 7% member had a 3 year employment contract from 2002 - 2005. The contract was mutually not renewed, we have had virtually no contact with her since then.

 

She had a lawyer send us a list of demands including rights, title and interest in part of the product line. The only alternative to this dissolution is bankruptcy. In liquidation assets would not come close to covering debt.

 

Is there any legal reason to negotiate with her?

Business Lawyer: Richard, Attorney replied 6 years ago

If you have a majority vote with the 2 of you abstaining because of a conflict of interest, you need not dissolve the company to get the assets to you. As long as you are selling the assets to the two of you for what would be fair market value...i.e., the debt you are assuming is at least equal to or greater than the value of the assets, you can sell these assets to the 2 of you for the debt. Then, the LLC has nothing left and you can let the LLC just sit.

 

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