I have a question about my legal liability after having sold my interest in a Nevada LLC. Here's the story:
I live in California but 2 years ago I invested $30K in a newly formed Nevada LLC. This LLC is a computer training school in Las Vegas, and was formed by a man I will refer to as Larry. Several private party investors, all of whom were friends or acquaintances of Larry, invested money in this business in exchange for a certain percentage of ownership. But we were all investors - none of us took an active role in running the company. Larry was the one and only person who had any part in the day to day operations of the company.
After 1-2 years of being in business, the company was just barely surviving and was running out of cash. But in November of last year Larry came to me and told me he had found another company (I will call it OTHERCO) that was willing to buy out my stake in the LLC for $35,000. Larry told me (and continues to tell me) that he opened the books to OTHERCO so OTHERCO had a clear and accurate financial picture when they agreed to purchase my shares. (They also agreed to purchase the shares of the other investors). So I agreed to the purchase, and over the next several months I received a total of $20K from OTHERCO.
However, the checks from OTHERCO stopped almost 2 months ago, and I recently received a letter from them stating that they had decided to stop all future payments "on the grounds of fraud." They claimed that there were misrepresentations in Larry's presentation to them and that there have been ongoing financial misrepresentations and accounting irregularities. Furthermore, they say in the letter that they believe I knew of these misrepresentations when I sold my shares and they are threatening legal action unless I return to them the $20K plus "reasonable interest."
Now as I said, the only person who had any knowledge of the day to day operations of the business was Larry. I don't beleive there were any financial misrepresentations to anyone, but I have no way of knowing for sure because I never had any insight into the day to day operations of the business, I never met OTHERCO, never participated in any presentations to them, etc. Like the other investors, I was simply a passive investor in this Nevada LLC computer school.
So here is my question: What legal liability do I have if any? Does OTHERCO have any legal legs to stand on here or are they simply trying to bully some passive investors? What can I do to protect myself from any legal action taken by OTHERCO against me? I would assume that my first step is to discuss with a lawyer and then have the lawyer send OTHERCO a letter clearly stating that I am not subject to any legal liablity as a passive investor in a Nevada LLC. Or am I? Any good advice would be appreciated.
I live in California but 2 years ago I invested $30K in a newly formed Nevada LLC. This LLC is a computer training school in Las Vegas, and was formed by a man I will refer to as Larry. Several private party investors, all of whom were friends or acquaintances of Larry, invested money in this business in exchange for a certain percentage of ownership. But we were all investors - none of us took an active role in running the company. Larry was the one and only person who had any part in the day to day operations of the company.
After 1-2 years of being in business, the company was just barely surviving and was running out of cash. But in November of last year Larry came to me and told me he had found another company (I will call it OTHERCO) that was willing to buy out my stake in the LLC for $35,000. Larry told me (and continues to tell me) that he opened the books to OTHERCO so OTHERCO had a clear and accurate financial picture when they agreed to purchase my shares. (They also agreed to purchase the shares of the other investors). So I agreed to the purchase, and over the next several months I received a total of $20K from OTHERCO.
However, the checks from OTHERCO stopped almost 2 months ago, and I recently received a letter from them stating that they had decided to stop all future payments "on the grounds of fraud." They claimed that there were misrepresentations in Larry's presentation to them and that there have been ongoing financial misrepresentations and accounting irregularities. Furthermore, they say in the letter that they believe I knew of these misrepresentations when I sold my shares and they are threatening legal action unless I return to them the $20K plus "reasonable interest."
Now as I said, the only person who had any knowledge of the day to day operations of the business was Larry. I don't beleive there were any financial misrepresentations to anyone, but I have no way of knowing for sure because I never had any insight into the day to day operations of the business, I never met OTHERCO, never participated in any presentations to them, etc. Like the other investors, I was simply a passive investor in this Nevada LLC computer school.
So here is my question: What legal liability do I have if any? Does OTHERCO have any legal legs to stand on here or are they simply trying to bully some passive investors? What can I do to protect myself from any legal action taken by OTHERCO against me? I would assume that my first step is to discuss with a lawyer and then have the lawyer send OTHERCO a letter clearly stating that I am not subject to any legal liablity as a passive investor in a Nevada LLC. Or am I? Any good advice would be appreciated.