If I’m 20% owner of a small business, can I refuse to sign a line of credit?
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If I’m 20% owner of a small business, can I refuse to sign a line of credit?
We take out a line of credit yearly. I want to be bought out of my shares. There is no buy/sell agreement, and the other owners don’t want to buy me out. Can I legally refuse to sign the line of credit until a negotiation is made regarding my buyout? Without the line of credit the business wouldnt be able to make payroll and potentially have to shut its doors.
Asked on January 3, 2016 under Business Law, Michigan
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 8 years ago | Contributor
If the line of credit would require you to personally obligate yourself or to guaranty the repayment, then yes, you can hold out--a business owner is not required to undertake a personal obligation like this unless he/she wants to or voluntarily agrees to do so. You can't be forced to undertake a personal obligation unless you agree to do so.
If you are not personally guarantying, etc. the credit or repayment, but just signing as a managing member of the LLC, then you'd have to sign: you have a duty to your fellow members to take reasonable steps in the business interest, and signing a document for the LLC which does not personally obligate you is reasonable.
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