Legal Question in Business Law in Washington

I am a member of and LLC that runs a business with a commercial lease. Simultaneously, I am a personal guarantor on the commercial space lease.

After working in the business in 2006 as an employee for only 3 months, the manager of the LLC fired me and forced me out of the physical space. He also removed all right I had to make decisions on behalf of the business. The next day he changed the locks. I clearly had no way to influence the business after that point.

3 years later, the business is performing poorly under his management. I have not been back since. Now they are facing bankruptcy and closing the doors. The landlord and other leasing companies are after all personal guarantors directly.

Do I have recourse against my partners, and/or defense against the impending lawsuit from creditors, as I had no ability to perform in the business? Am I doomed to bankruptcy as well? I do not have the personal income or assets to pay the leases.

Asked on 9/23/09, 3:31 pm

1 Answer from Attorneys

James Vasquez In Pacta, PLLC

Unfortunately, you should have assigned your liability to the LLC, the manager, or the other members when you were fired. Creditors are not interested to what has occurred to the LLC or its management. The fact is that you signed as a guarantor making yourself liable for the lease. You should however check the term of the guarantee as most usually expire within one to two years after the initial lease signing, and you should check the LLC operating agreement for any hold harmless provisions. If you are sued you would have to bring the LLC, manager and other members into the suit, and demand that they pay for the defense of the suit and indemnify you from liability for the lease.

The facts you have provided actually bring up another issue, that is were you properly disassociated from the LLC. Generally speaking as a member of an LLC you can only removed by agreement or operation of law. one member cannot simply lock the other out of the business. You maybe entitled to your share of any profits if you were not properly removed, however the inverse may also be true you may be responsible for your share of debt.

I suggest that you seek further advice from an experienced attorney.

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Answered on 9/29/09, 2:14 pm

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