More details to this question:
If two people own an llc business, one owning 70% and the other owning 30% in NJ, and one leaves while the company is in debt, does the person owe the percentage of debt before they can legally leave? Example: Company A is in debt 10,000, Parter A owns 70% and Partner B owns 30%. Partner b wants to leave the company and move on. Is Partner B responsible to cover their 30% of the 10,000 owed? If they are and they pay it, does the business eventually have to pay them back? This is for an LLC in NJ. Please let me know when you have the chance. Thanks,
1 ANSWER
William Mack
The answer is a little more complicated than a simple "yes" or "no". If the accounting in the LLC has been done correctly, each member's capital account should reflect his/her pro rata share of the debt. If the capital account is paid out to the departing member, then in effect the departing member will have "paid" for his share of the debt, because the capital account will be lessened by the pro rata share of the whole debt. The remaining member will then bear the whole debt in his/her capital account.
This can be varied in the operating agreement however, and so it is difficult without knowing your arrangement to say anything else.
In any event, the LLC is not obligated to "pay back" anything to the departing member.
Answered on May 21st, 2014 at 3:26 PM