Business closed, partner trying to screw me over

[DoesNotCompute]

What is the name of your state (only U.S. law)? Oregon

I was a partner in a retail business that closed late last year. The bankruptcy is discharged, and was a "no asset" case. The trustee decided against liquidation of our inventory, so we were able to keep it.

I have half of the inventory, my partner had the other half plus all the fixtures and computers. She is now telling me that she sold the inventory that is in my possession to her sister! They want to come over to my house to "collect" it. Can she do this? Can she really sell my half of the inventory out from under me? I overheard a conversation between my partner and her sister that the sister will "buy" all the inventory, then give her half of the money when she sells it.

According to the lawyer who is handling the unwind of the LLC, I can purchase the inventory that I have for a set amount, and that I have 4 months to come up with the money. That is no problem, I have that in the works. This attorney is a complete jerk and will only talk to her, even though I am a partner of the LLC he is representing. He is a friend of a friend of hers, and has basically waged war on me.

I need the inventory to sell so I can keep a roof over my head and food on the table for my children. I am beyond upset that she feels she can just take that away from me.

At this point I have ceased all contact with my former business partner, and I am not going to allow her or anyone known to her on my property.

What is my next step? Basically, what I would like to know are what are my rights as a partner? She is trying to cut me out, and I don't think that's fair. Is it legal?

 

[LdiJ]

What is the name of your state (only U.S. law)? Oregon

I was a partner in a retail business that closed late last year. The bankruptcy is discharged, and was a "no asset" case. The trustee decided against liquidation of our inventory, so we were able to keep it.

I have half of the inventory, my partner had the other half plus all the fixtures and computers. She is now telling me that she sold the inventory that is in my possession to her sister! They want to come over to my house to "collect" it. Can she do this? Can she really sell my half of the inventory out from under me? I overheard a conversation between my partner and her sister that the sister will "buy" all the inventory, then give her half of the money when she sells it.

According to the lawyer who is handling the unwind of the LLC, I can purchase the inventory that I have for a set amount, and that I have 4 months to come up with the money. That is no problem, I have that in the works. This attorney is a complete jerk and will only talk to her, even though I am a partner of the LLC he is representing. He is a friend of a friend of hers, and has basically waged war on me.

I need the inventory to sell so I can keep a roof over my head and food on the table for my children. I am beyond upset that she feels she can just take that away from me.

At this point I have ceased all contact with my former business partner, and I am not going to allow her or anyone known to her on my property.

What is my next step? Basically, what I would like to know are what are my rights as a partner? She is trying to cut me out, and I don't think that's fair. Is it legal?

You each are entitled to 1/2 of the remaining assets of the business if you were equal partners. If your partner already has half of the assets and all of the fixtures and computers, then your partner already has more than half. I would tell her to pound sand regarding your half of the inventory.

I also am not certain why you have an attorney "unwinding" the LLC. That is something that you could have done yourselves.

 

[DoesNotCompute]

More info

Very good points, thank you. I don't know why she is using an attorney to do something that we could easily do ourselves. I've looked into filing the Articles of Dissolution, but she wants to pay (what she claims is) $7,000.00 to the attorney to do it for her.

I have more information to shed light on:

Specifically, the fact that she undervalued the inventory substantially. She and her sister both signed affidavits to the BK trustee claiming each piece of the inventory was worth X amount. Based on their lowball figures, the trustee decided against seizing the inventory for sale to satisfy the creditors.

Now that the BK is discharged, the official closing of the LLC has begun. Here is the sticky part- the distribution of the businesses assets. As I stated before, I was given about 30% (since she got half the inventory AND all the fixtures/computer equiptment) of the physical inventory. That changed yesterday when she "sold" the inventory in my possession to her sister, without my knowledge or consent. They believe that they can come to my home to claim it. Alternatively, she has suggested that I "purchase" the inventory from the LLC at literally 5 times the value that they gave to the BK court! She claims now that this is the figure her sister is willing to pay for said items. Yes, the same sister that signed the affidavit that she is a professional in the liquidation business, and she has valued our inventory at X (lowball) amount. Some months ago, I overheard a hush-hush conversation between the two of them, basically saying that the sister would make a lowball purchase of the inventory, and after the bk was discharged, she would sell it back to her for pennies on the dollar or split the profit with her when each item sells.

Doesn't any of this constitute fraud?!

 

[LdiJ]

Very good points, thank you. I don't know why she is using an attorney to do something that we could easily do ourselves. I've looked into filing the Articles of Dissolution, but she wants to pay (what she claims is) $7,000.00 to the attorney to do it for her.

I have more information to shed light on:

Specifically, the fact that she undervalued the inventory substantially. She and her sister both signed affidavits to the BK trustee claiming each piece of the inventory was worth X amount. Based on their lowball figures, the trustee decided against seizing the inventory for sale to satisfy the creditors.

Now that the BK is discharged, the official closing of the LLC has begun. Here is the sticky part- the distribution of the businesses assets. As I stated before, I was given about 30% (since she got half the inventory AND all the fixtures/computer equiptment) of the physical inventory. That changed yesterday when she "sold" the inventory in my possession to her sister, without my knowledge or consent. They believe that they can come to my home to claim it. Alternatively, she has suggested that I "purchase" the inventory from the LLC at literally 5 times the value that they gave to the BK court! She claims now that this is the figure her sister is willing to pay for said items. Yes, the same sister that signed the affidavit that she is a professional in the liquidation business, and she has valued our inventory at X (lowball) amount. Some months ago, I overheard a hush-hush conversation between the two of them, basically saying that the sister would make a lowball purchase of the inventory, and after the bk was discharged, she would sell it back to her for pennies on the dollar or split the profit with her when each item sells.

Doesn't any of this constitute fraud?!

It does sound like you ALL (because you went along with it) defrauded the bankruptcy court and by extension, the creditors. Now, your partner and her sister are attempting to defraud you, and $7000.00 in attorney fees to unwind an LLC is ludicrous unless Oregon has some really funky laws about dissolving LLCs.

I suggest that you consult a local attorney. I am not suggesting that you retain one, but pay for an hour of an attorney's time to get a clear picture of where you stand right now.

 

[DoesNotCompute]

I was not a party to any of it, in fact I was not made aware of the bk until it was all done. she kept me in the dark and went behind my back on all of it. The bk was a personal ch7,.the business is not filing, it is only dissolving. So, in a nutshell I made no statements to any court, nor was I listed as a creditor. Does that change anything?

 

[LdiJ]

I was not a party to any of it, in fact I was not made aware of the bk until it was all done. she kept me in the dark and went behind my back on all of it. The bk was a personal ch7,.the business is not filing, it is only dissolving. So, in a nutshell I made no statements to any court, nor was I listed as a creditor. Does that change anything?

Ok,you are saying that a bk for the LLC was NOT filed? That she filed a personal bk only? Were you a personal signer for any debt for the LLC? As a partner, you could possibly be held responsible for any outstanding debt. Also, the assets of the LLC should pay for any outstanding LLC debt before being split between the two of you.

I feel even more strongly that you need to consult with a local attorney to get a clearer picture of where you stand.

 

[DoesNotCompute]

You are correct, there was no bk on the llc. The lawyer thought it unneccesary after her personal bk. I did not sign any document with any vendor, landlord,etc. No personal guarantees were made by me. He said I should not file because I have no assets for them to take, and they know it.

The deal that was approved by the lawyer was that I could purchase the inventory from the llc, and that money would go to satisfying creditors in the unwind. We agreed upon the price that she stated as her declared value in her bk. So basically now she is demanding 5x the stated value from me, and she went behind my back and sold it to her sister. You can bet the farm that her sister didn't part the inflated doubt. I had no problem paying even at the 5x price, but she sold it out from under me and told me about out later...when she rudely called me demanding to know when her sister could pick up"her" new property.

 

[DoesNotCompute]

Ugh! I hate auto correct. That was meant to read "didn't pay the inflated amount."

If she did give her a check for the inflated amount, it was cashed and handed right back to her.

 

[latigo]

. . . I was a partner in a retail business that closed late last year . . . the lawyer who is handling the unwind of the LLC . . . attorney is a complete jerk and will only talk to her, even though I am a partner of the LLC he is representing . . . . .
I have ceased all contact with my former business partner, . . . what are my rights as a partner? . . .

You don’t have any rights as a “partner” because this is not a “Partnership”!

It is a LIMITED LIABILITY COMPANY, which, it seems, has chosen to voluntarily dissolve in accordance with Section 63.621 of the Oregon Revised Statutes (ORS).

And a LIMITED LIABILITY COMPANY does not have ”Partners”. Persons having proprietary rights in an LLC are known as “Members”.

There are significant differences between an LLC and a Co-partnership both in structure and the legal relationship between members of an LLC and partners in a co-partnership

Perhaps if you’d had troubled yourself to read, or were to read, Oregon’s Limited Liability Company Act (ORS Chapter 63), the LLC’s Articles of Organization and Operating Agreement, if any, you would have some understanding of the nature and consequence of this unique business structure and your rights and responsibilities as a member of it.

THEN you might agree that your “ceasing all contact with the other member” particularly during the period of dissolution and distribution of assets (and beyond) is dangerously foolhardy.

Dangerous in the sense that under ORS 63.629 the other member can continue to bind the LLC and possibly dilute your distributive share of the assets.

In view of the apparent abuses by the other member, I would recommend that you petition the circuit court (ORS 63.661) and request that the voluntary dissolution continue only under court supervision.

And that the other member be ordered to render a fully documented accounting of her activities to date.

 

[DoesNotCompute]

I apologize for using incorrect terminology. It has apparenly rubbed you the wrong way.

The reason I ceased text and phone contact is due to the 211 mean, condescending, outright abusive texts that she sent me just yesterday. I could tell her sister was sending many of them, and I frankly did not want to deal with either of them. Are you suggesting that I allow her to continue? I can, I guess. They can be sent to a blind box.
Thank you all for your input. I believe I will be speaking to my attorney on Monday morning!