A partner of this LLC wants out and still owes for a 36K loan. Should the remaining partner sign the "change in ownership" papers or make it conditional
on the repayment of the full loan amount?
2 Answers from Attorneys
You can do whatever you like, so long as everyone agrees. The path of least resistance would be to do a settlement agreement in which you get back the ownership interest now, and the person leaving would execute a promissory note to pay back the loan. Forcing that person to stay in a business because s/he owes the business money is usually going to be counterproductive.
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Concur with David. Partners leaving a partnership are like divorces. If you can do an amicable split then do it; if you let it get nasty it will get nasty. There are a lot of things to look at including the value of the business now and in the future compared to the loan. Depending on what type of business you have will determine what the value of the business is. It may be that his interest is valued more than $36,000 i.e. the business owes him or it may be the other way around. I would suggest consulting with a lawyer like David or business lawyer in your area so that can give you advice specific to your circumstances.
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