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I know this situation is getting old to you, it definitely

Hi Roy,I know this situation...
Hi Roy,I know this situation is getting old to you, it definitely is for us. However, we have taken your advice again and our investor is still not satisfied. She had her lawyer draw up an agreement that has some "recitals" in it. I have attached the document in this message.In herrecitals she states that she became a member with our company in December of 2016. Although this is technically true... that's all it really is... a technicality. Her money came into our company October of 2015, as I've told you in past messages. She invested with a company called I-Strategy LLC who invested some of her money with us. However, in the middle of her 2-year investment (December 2016), I-Strategy LLC dissolved it's company and left the investor directly with the companies they invested her money in. There was a new subscription agreement signed and we did fail to send her an operating agreement because we were under the impression she already had one when she first invested.Also, in the "agreements section" There is a clause in this agreement that says each shall bear his/her own costs and attorneys fees. However, there is also another "attorneys fees clause". This is confusing to us. We are new and don't know what that means.Lastly, We have expressed to her multiple times that our company is dissolving after she receives her money. We told her we wanted to keep the money until she is able to review the accounting and decide weather or not she wants to go to court. We did this because if she does, we will use her money to go to court with because it's all the money that the company has.She wants us to send her the money back and then take a few months to review the accounting we sent her and she wants us to agree to maintain our positions as Managers of Creating Rhodes LLC in order to answer all of her questions regarding the accounting.I don't believe she is telling her lawyer the full truth. We would hire an in person lawyer to help us but we are opting to use this service because we are trying to reserve as much of her money that is left to send back to her and you've given pretty good advice.Here are my direct questions -1. I will admit that her lawyers document looks a lot more formal than ours did. However, are the "recitals" normal and necessary? If so, how should it be re-worded to reflect the full truth that I stated above in the beginning of this message.2. With the two different, and seemingly conflicting, "lawyers fee" clauses, are we protected against any and all legal costs in the event that we go to court and she loses. We are willing to release her money to her and we have even agreed to a modified version of section 1542 of the California Civil Code. However, we really want to make sure that she doesn't get her money back, leave us broke and at some point down the line decided to sue without merit simply because they know we don't have the money to defend ourselves.3. While we are willing to answer questions she may have regarding the accounting (although the numbers will speak for themselves) we don't find it necessary to leave the company open. Every year that the LLC is open, we incur a state tax cost that we cannot afford. As we have stated before. After we release her funds, we (Creating Rhodes LLC) will have no money left at all. How should we proceed regarding this?
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Answered in 3 minutes by:
11/17/2017
Roy Hadavi
Category: Business Law
Satisfied Customers: 988
Experience: Attorney at Law Offices of Rosenstein & Associates
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Hi. I see that another attorney was assisting you. Did you mean to re-post this message a second time for me to assist?

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Customer reply replied 30 days ago
I did
Customer reply replied 30 days ago
Are you available for a phone call?

Just wanted to make sure that you would not be double charged. Please give me a moment to review all of the information. Thank you for giving me the opportunity to assist you once more.

I would be happy to jump on a phone call, but let me review the information you provided so far and see if I can answer you through the chat. I prefer to save you the money on a phone call. If you feel a phone call would be beneficial, after I answer you through this thread, let me know and we can jump on a call.

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Customer reply replied 30 days ago
Ok. I signed up fo the 7 day free trial and the app is saying that it is gifting me a free phone call
Customer reply replied 30 days ago
However, I will wait for you to respond first

Oh, okay. I am not familiar with the promotions that the site offers. I am a user, just like you. Let's see if I can save you the phone call for a better use though.

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Customer reply replied 30 days ago
Ok

1. I will admit that her lawyers document looks a lot more formal than ours did. However, are the "recitals" normal and necessary? If so, how should it be re-worded to reflect the full truth that I stated above in the beginning of this message.

Recitals are a normal part of agreements. They are intended to give the "story" of the purpose of the agreement and the reason the parties are entering into the agreement. You can add in a recital providing the information you stated above, in order to flesh out the recital more properly. However, it is not 100% necessary.
2. With the two different, and seemingly conflicting, "lawyers fee" clauses, are we protected against any and all legal costs in the event that we go to court and she loses. We are willing to release her money to her and we have even agreed to a modified version of section 1542 of the California Civil Code. However, we really want to make sure that she doesn't get her money back, leave us broke and at some point down the line decided to sue without merit simply because they know we don't have the money to defend ourselves.

The first attorneys' fees sections relates specifically to the costs of preparing the agreement and settling this matter. The second attorneys' fees clause relates to any dispute that arises regarding this matter. As I previously mentioned in our discussions, if you close down the LLC, short of her proving that you should be held personally liable, she will not be able to pursue any claim against you. Also, this agreement releases you as an employee, representative, etc. of the LLC.
3. While we are willing to answer questions she may have regarding the accounting (although the numbers will speak for themselves) we don't find it necessary to leave the company open. Every year that the LLC is open, we incur a state tax cost that we cannot afford. As we have stated before. After we release her funds, we (Creating Rhodes LLC) will have no money left at all. How should we proceed regarding this?

Close down the LLC after she has reviewed the accounting, signed the agreement and you have disbursed the funds. You can even include a recital stating that you intend to close down the LLC after the agreement is signed.

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Customer reply replied 30 days ago
If our accounting (bank statements, etc.) show real business and real estate transactions that account for every penny from the time her money came in until the time we closed out her investment, how will she be able to prove that we are personally liable?

There are two ways that she could prove personal liability.

  1. If she can show that you committed fraud, which you did not.
  2. If she can show that you did not properly maintain the LLC, which you did.
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Customer reply replied 30 days ago
I feel she is upset because of her loss, understandably. However, she isn't being realistic in terms of her request for us to sign an agreement that allows her to receive her money while promising to remain the managers of Creating Rhodes LLC until she has time to review the company accounting which she says may take a few months. We find this request to be unreasonable. What are your thoughts about that? If you find it as unreasonable as we do, how would you suggest we go about this? We have already bent on Section 1542. Are we obligated to wait until she reviews the accounting since she is planning to take months to do so? Should we even sign any agreement and send her the money before she reviews the accounting?

I would not release the money, until after she has reviewed the accounting and agreed that the LLC may be closed down.

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Customer reply replied 30 days ago
I agree with that. However, when we went that route the first time she said that made her feel as if we were not being honest and that she will be extra vigilant to try and find fraud. She also threatened that she could pierce the corporate veil and so there's no use in us holding her money anyway. But at this point, we realize that our accounting is line by line and she will do probably do that any way. We really have nothing to hide. I'm assuming that threats like this are common place when there's a loss. Am I right? Either way, you would still suggest that we hold the money, correct?

Sorry, I forgot that she had threatened the extra vigilance if you held the money.

No, if she signs the agreement and you release the funds and you know that there is no issue with the accounting, there is no harm in waiting to close the LLC. You should just let her know that you will be holding the necessary money for the franchise taxes for the LLC, so that if she waits until 1/2018, you are not personally out of pocket for any of the LLC costs.

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Customer reply replied 30 days ago
How long is reasonable for us to wait?
Customer reply replied 30 days ago
She says months but that’s just what she says. It could be another year.

You should include a set amount of time in the agreement for her to review and release.

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1 month at most, I would think.

Roy Hadavi
Category: Business Law
Satisfied Customers: 988
Experience: Attorney at Law Offices of Rosenstein & Associates
Verified
Roy Hadavi and 87 other Business Law Specialists are ready to help you
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Customer reply replied 27 days ago
How much would it cost to hire you as our actual lawyer?
Customer reply replied 27 days ago
We need a lawyer and you pretty much know what’s going on

Hi. Responding to everything in the new thread you created.

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