Failing LLC, bad partner

[rugby86]

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

Hi advisors!

I have inherited 50% ownership in a failing LLC that holds and rents various real estate. One of the loans is from a major bank and the loan contains a personal guaranty signed by my deceased father and the other 50% business partner. The market value of the property has fallen far from the loan amount, so the bank wants to have it restructured and a portion paid to offset the loan-to-value. For the purposes of the situation, assume the business partner is uncooperative.

Is it possible to have the bank seize or put liens on my 50% of the small equity in all the properties of the company to satisfy the debt, without requiring the consent of the partner, rather than go after my personal assets?

 

[LdiJ]

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

Hi advisors!

I have inherited 50% ownership in a failing LLC that holds and rents various real estate. One of the loans is from a major bank and the loan contains a personal guaranty signed by my deceased father and the other 50% business partner. The market value of the property has fallen far from the loan amount, so the bank wants to have it restructured and a portion paid to offset the loan-to-value. For the purposes of the situation, assume the business partner is uncooperative.

Is it possible to have the bank seize or put liens on my 50% of the small equity in all the properties of the company to satisfy the debt, without requiring the consent of the partner, rather than go after my personal assets?

Your personal assets should be safe. You didn't sign any personal guarantees, your father did. Your father's estate however (any assets that he had besides the LLC) would be vulnerable.

 

[rugby86]

Your personal assets should be safe. You didn't sign any personal guarantees, your father did. Your father's estate however (any assets that he had besides the LLC) would be vulnerable.

My mistake, I should have wrote estate. That's what is in danger and I'm trying to find a way to satisfy the personal guaranty using the LLC's remaining assets in order to protect the rest of the estate, as the LLC is not making any money nor will it with the existing partnership, and is something I am eager to be rid of.

 

[LdiJ]

My mistake, I should have wrote estate. That's what is in danger and I'm trying to find a way to satisfy the personal guaranty using the LLC's remaining assets in order to protect the rest of the estate, as the LLC is not making any money nor will it with the existing partnership, and is something I am eager to be rid of.

What kind of assets does the estate have? Life insurance would pass directly to a beneficiary and would not be part of the estate. Retirement accounts would also pass directly to a beneficiary and would not be part of the estate (most of the time anyway).

With an uncooperative business partner, its not going to be easy to liquidate the LLC to cover the debts.

 

[tranquility]

The first thing I'd do is get a copy of the organizing documents. There is no way to guess where the power lies and if the OP (through the estate) has any say to anything the LLC does. Perhaps the other member has a duty to buy or sell some portion of the ownership in this situation. Before even thinking about ramifications, I'd gather the facts.