I have an Llc with 2 other partners. I am 51% owner and they are at 24.5% each. Per our operating agreement I am to receive a salary for acting as manager. My partners own a real estate company and we rented space from the company. There were months were I didn't take my salary because there wasn't enough money to pay it. In return there were months where we didn't pay rent on 1 of the locations we were in, which he said was fine. We were about to close the company when someone offered to purchase it from us. When this happened he brought up all this back rent that needs to be paid. My question is can I bring up my salary which wasn't paid? In which order would these be paid? The amount is about the same. I proposed that we split the pay and both take loses on what we are owed to get something for which we were going to close. He says we can't because he can't write off the lose without putting the Llc into bankruptcy. Please help me understand the law. I need to know in which order is debt paid? Does salaries come before creditors or how does it work. Thank you for your time and could you refer a good lawyer who knows Llc law and bankruptcy law for me. Thank you.
2 Answers from Attorneys
Re: Llc laws
Thank you for your inquiry.
When you dissolve an LLC all creditors will need to be paid off first; secured creditors then unsecured creditors. After you are able to resolve all outstanding business debts you will disperse remaining funds according to your operating agreement.
If you would like to speak to me further about your situation feel free to contact me at the number below.
Jim Herbe, Esq.
Re: Llc laws
Secured creditors come first (unless you are GM, being bailed out by Uncle Sam). Then come unsecured creditors (those who do not have a collateral interest in property of the company). The latter include employees of the company. The LAST people to be paid upon sale, dissolution or insolvency of a company are the owners. As a Member of the LLC, you are WAY down the line of claimants entitled to be paid from the assets and revenues of the company. That was one of the many risks you took in forming a company that went bust.
Recognize that your Manager salary - if, indeed, you were an employee of the LLC - is different from your distributions as a Member of the LLC. I would argue in your behalf that you and the landlord (the company of your "partners") are on equal footing in regard to the salary agreement and rental contract, and should, as you propose, share equally in the losses as unsecured creditors.
I do not understand how his compromise of the rent debt forces the LLC into bankruptcy. I think he is blowing smoke to try and differentiate his claim from yours.
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