If I buy into an LLC am I responsible for debt incurred before I was listed as a partner?
Question Details:
LLC was established in April; in September I purchased 20% of the LLC. I have 2 partners who own 40% each. They did incure debit before I become a partner and now the business is struggling. I am the only partner running the business and am trying to pay back debt along with keeping the business going. If a company tries to sue us for costs they incured before I was a partner am I legally responsible also?
What does your purchase agreement state? When you bought in to the LLC I am sure that you looked at its assets and its liabilities, The debt is one of its liabilities. And I am sure that the amount that you invested was based upon a complete assessment of both and that in light of it all you still thought it was a good investment. That is part of what is known as due diligence in the purchase. Was there a term sheet - a sheet that lists all the things that you negotiated in the purchase? Generally, when you buy a business you buy the debt unless you negotiate otherwise. If the company sues they will sue the LLC, which you are a apart of. It sounds as if you got in to something you did not really expect. I would take the agreement to an attorney to read for you in light of the laws in Delaware. Good luck.
