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kifli
01-30-2011, 08:39 PM
Our business is doing horrible and we need to take action.

We DO NOT want to file for bankruptcy.

Our 5 year lease is up June 30, 2012 and would like to terminate it early b/c we have NO MONEY!!! We've spoken to the landlord and regardless of what he comes back with...we are moving out. We are indeed up against the threat of bankruptcy....but most importantly we are dissolving our LLC once our 2010 taxes are filed and complete.

My question:
If we dissolve our LLC, does it make it LESS likely that our landlord will come after us? We seriously have nothing, except our personal home. On the lease, it has our business name, but at the end, my husband signed it in two places:

"As President"

"As individually guaranteeing the performance of the terms and provisions of the lease"

Can he come after us and take sue us for all the little bit that we have? Like I said, our LLC is worth nothing. The only assets we have are our equipment that we use on jobs (we are a photography business).

We DO NOT want to file for bankruptcy, but is that our only option to get out of this mess? I can't pay another year of a lease. We just don't have the money!

Thanks!

Steve B
01-31-2011, 06:57 AM
In most states, the landlord has an obligation to try to mitigate the loss. So, if he rents it out to someone else during the year, then you wouldn't have to pay the rent for the months someone else is paying him. Perhaps you can help him find another renter. Your landlord just wants to get the money and probably doesn't care who it comes from.

Spider
01-31-2011, 11:47 AM
Don't just walk away! Landlords know each other and refer tenants. And, although I'm not an attorney, I believe the "..individually guatanteeing..." has you locked in to pay or compensate for loss. Have you spoken with your landlord? Have you explained your plight? If you have been paying your rent on time and are otherwise a good tenant, he may be lenient and waive the rest of the lease. Or perhaps he will accept a few months compensation for ending the lease early. You will never know until you ask.

If the landlord knows you will go bankrupt, he knows he will not collect, so your bankruptcy doesn't serve him. If you can buy down the lease term (which is paying to end the lease) he may be amenable to that solution. (For him 3 months is better than no months no matter what he is entitled to.)

Also, you never know if he has someone waiting to rent your space. He may have a smaller cheaper premises that you could afford that he would be willing to transfer the lease (cancel the old one and start a new one.) If you treat your landlord right, he may even be able to come up with a solution that could save your business. Talk to him. landlords are people, too, if you treat them as such. I had good relations with all my landlords in the past and they proved very helpful on several occasions.

jamesray50
01-31-2011, 08:29 PM
I'm not an attorney or lawyer, but I thought the reason for a LLC was so that you wouldn't lose your personal assets if the business failed. So, I would read the lease carefully to see what it says if you were to break the lease early and what the landlord would do. I think any action would have to be taken against the corporation and not you individually. But, I'm not sure. If it was me, I'd stop paying rent now, let him file an eviction, get a judgment against the corporation and move out.

ArcSine
02-02-2011, 01:23 PM
Agreeing with Frederick (not an attorney myself, either, nor do I play one on TV) I think the second signature on the lease probably constitutes a personal guarantee. A PG does an end-run around the "corporate veil", and hence exposes personal assets to the business obligation.

But as Steve mentioned, perhaps you can either sublet the place, or help the landlord replace you with another tenant.

Spider
02-02-2011, 02:07 PM
... stop paying rent now, let him file an eviction, get a judgment against the corporation and move out.Not a good idea. Very much, not a good idea!

Dan Furman
02-02-2011, 02:10 PM
Not a good idea. Very much, not a good idea!

totally agree.

Steve B
02-02-2011, 02:35 PM
That's exactly why he got a personal guarantee. He already thought of the obvious that a lot of small business go out of business.

Reflo Ltd
02-03-2011, 07:11 PM
Not an attorney here either but here is my take......

I disagree that a signature consitutes a personal guarantee. Any business transaction that is contractual would require an authorized person to sign on behalf of the business. The business cannot sign a document... a person has to.

Also important to note is that not every LLC or Corporation holds you harmless from the actions or debts of the business entity. I understand that this is especially true in cases of single-member LLCs and in corps where one person owns all of the shares or perhaps even a vast majority.

I think it might be more important in the contract to see who the agreement is between. Is it between ACME Properties and Smith LLC? or was it between ACME Properties and Joe Smith? The person signing the contract is less important, in my experience.

Reflo Ltd
02-03-2011, 07:14 PM
Another thought comes to mind. A debtor would have rights to the property of the LLC when they disolve. If the LLC has any propety, equipment or other things of value, they are quite possibly considered the property of the LLC not the individuals.

Steve B
02-03-2011, 08:24 PM
Pete - his original post was clear that he was signing as both the representative of the LLC AND as ""As individually guaranteeing the performance of the terms and provisions of the lease". I think the word "individually" will be easily interpreted by the court to mean he is personally responsible.

Reflo Ltd
02-03-2011, 08:51 PM
I still do not think that means a slam-dunk for the landlord. There are always variables and contract language beyond those select quotes can affect the matter.

Also, a large part of this might really just come down to the wishes of the landlord. He may not want to completely ruin a family for dropping the final year of a 5-year lease or he may want every red cent.

The original poster needs to discuss this openly and honestly withy the landlord. If he wants every cent then they can take the matter to court where they will either have to pay an attorney or defend themselves (pro se). If the latter... which is usually a recipe for disaster... I recommend they research their local laws very well and taht includes any relevant case law.

I've acted pro se on a number of occassions and have had 100% success but I went in knowledgeable and unintimidated.

J from Michigan
02-09-2011, 07:54 PM
I dealt with a lot in previous experience in auto sales/management...

It sounds like husband signed as a Guarantor, which means your company didn't have credit (which is more typical than not) or the required number of years financial records at the time of signing.
-Think of it as 'co-signing' for someone, only that someone is a company... that's why he had to sign it twice (once as President and the other as co-signer/Guarantor.)

That's what a Guarantor is... the person who puts their credit score on the line for a (read: their) company.

I'm guessing that another person, besides your husband had to sign as "Agent" or "Secretary," etc... to show that your husband was permitted to sign FOR the company. (anyone could sign that, and it but I'm guessing you did.)


Does this sound about right?

Jacoby
03-29-2011, 03:40 PM
He's not able to take your house. The best thing to do is to let your landlord know about your situation. Tell him that you cannot afford the lease. Depending on how he reacts to what you tell him, there are many things that you can do.