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Ask a Lawyer -- LLCs
LLC Question 114
Question: I have an LLC which is now being sued by a company for a past-due debt of appx. $3500. My LLC had losses in 2005 and 2006 and now we have no cash/assets to repay the debt. How should I handle the lawsuit? Am I personally liable for this debt? What is the best way to resolve this...bankruptcy?
Response: If you are being sued, get legal representation. Generally, LLC members are not liable for the debts of the LLC unless they guaranteed or cosigned on the LLC debt. That said, I would not be surprised to see a creditor attempt to reach the assets of the LLC members even without a guaranty.
Which way to go: bankruptcy or dissolution for the LLC? I'm not a bankruptcy specialist so I really could not say what are the benefits of bankruptcy for an LLC based upon the facts stated above. If the LLC debts exceed the assets with no realistic hope of the LLC becoming profitable, dissolution makes sense. Here is a copy of the LLC Articles of Dissolution filed with the New York Department of State to begin the process of dissolution. You will find a discussion of LLC dissolution under New York law here. Given there are creditors seeking collection against the LLC, hire a lawyer to do the dissolution to make sure it done in accordance with the law.
Submitted: 6-26-2007; Lilliana, NY
Response: 7-13-2007; JJR
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