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Henry E Knoblock III

Henry Knoblock’s Answers

4 total

  • What's the best way to convert from a New Jersey LLC to a Delaware C corporation?

    We're a team of 3 co-founders of a startup which was registered in New Jersey just a couple months ago as an LLC. Our equity is split 35/35/30. Currently, in Boston, we have an angel investor who's ready to invest in our company by way of a conver...

    Henry’s Answer

    While obviously the golden rule applies here, (those with the gold make the rules) it is worth asking the question as to why a Delaware C corporation since there are significant tax disadvantages to shareholders to being a C corporation before the time is right (think double taxation).
    There are two key facts which are omitted from your writeup which could allow for a more indepth and better answer. The first is what is your business and business plan - what is your plan for growth and how much outside capital, if any, will you need going forward (my guess is that since you started out as a NJ LLC you did not have delusions of grandeur)- the second fact is what will the convertible note convert to - common or preferred - if preferred why not preferred units and keep the tax structure better for the current members? It seems to me that converting to a DE LLC as part of the proposed financing might be a happy middle ground for all involved.

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  • I'm in a family business with my two brothers and two sisters it's a small Corp. we are all equal shareholders.

    We are also employees of the company, recently. I had a falling out with my siblings over money. I was fired from my job and subsequently sued for 50k I don't make enough money to fight it now that I don't have a job. My siblings told me they wo...

    Henry’s Answer

    You ask is this legal? The answer is yes - a company in Massachusetts can terminate an employee/shareholder for cause and yes it can sue that terminated employee/shareholder for whatever cause of action they allege and yes as unseemly as it may appear they can then propose to settle your claims against them and their claims against you if you agree to sell your stock back to the Company or to your fellow shareholders. Not knowing the facts behind the company's actions I cannot however advise as to whether such actions were prudent and whether they will hold up in court.

    My suggestion would be to immediately speak with a Massachusetts attorney (I assume you are a Massachusetts corproation not a Delaware), have him or her send a letter putting your siblings on notice and to have the attorney answer the complaint, file a counterclaim and if appropriate file a counterclaim under MGL c. 93A (triple damages and attorneys' fees) for bad faith and unfair dealing. If you were not paid your last check when you were terminated you also can file a Complaint with the Massachusetts Attorney General's office for unpaid wages. It also carries the threat of criminal prosecution for the officers of the Company if they fail to pay up. These actions will get you back to an equilibrium where you then can properly assess what the appropriate steps are to resolve this matter without being pressured to settle.

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  • I'm in a family business, (corp.) 5 members,we are all employees of the company I was fired then sued for 50k.If I wanted them

    to drop the lawsuit I had to sell my shares of the company to to my siblings for fair market value. Is this legal.

    Henry’s Answer

    You ask is this legal? The answer is yes - a company in Massachusetts can terminate an employee/shareholder for cause and yes it can sue that terminated employee/shareholder for whatever cause of action they allege and yes as unseemly as it may appear they can then propose to settle your claims against them and their claims against you if you agree to sell your stock back to the Company or to your fellow shareholders. Not knowing the facts behind the company's actions I cannot however advise as to whether such actions were prudent and whether they will hold up in court.

    My suggestion would be to immediately hire an attorney, have him answer the complaint, file a counterclaim and if appropriate file a counterclaim under MGL c. 93A (triple damages and attorneys' fees) for bad faith and unfair dealing. If you were not paid your last check when you were terminated you also can file a Complaint with the Massachusetts Attorney General's office for unpaid wages. It also carries the threat of criminal prosecution for the officers of the Company if they fail to pay up. These actions will get you back to an equilibrium where you then can assess what the appropriate steps are to resolve this matter without being pressured to settle.

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  • If business partnership entered into a one year lease, are we both personally liable even if partner wants out of the business

    Hi I started a partnership with a friend in Sept. of this year. We sign a one year lease. a few days ago she gave me a letter saying she does not want to be in the business any more. Is she liable for half the rent for the one year lease. I find ...

    Henry’s Answer

    I will assume you are located in Arizona and that there is no partnership agreement in place at this time which addresses the issue of partner withdrawal.

    Arizona Revised Statutes Section 29-1012.A defines a general partnership as "the association of two or more persons to carry on as co-owners a business for profit . . . whether or not the persons intend to form a partnership" unless the business is a corporation, a limited liability company or formed under some other Arizona statute. Arizona general partnerships may exist without a written agreement of any kind signed by the partners. However, anybody who intends to form a general partnership or who has an existing general partnership should have the partners adopt a written general partnership agreement that specifies the rights and obligations of all the partners.

    All general partners of a general partnership have unlimited personal liability for all obligations and liabilities of the general partnership. Assuming a legal obligation is incurred in the name of the partnership, if a general partner signs a contract on behalf of the partnership that obligates the partnership to pay $10,000, all the general partners may be personally liable to satisfy the obligation absent a written agreement otherwise.

    I would suggest that if your partner no longer wishes to be a partner that an agreement be reached to resolve the matter. Because all general partners of an Arizona general partnership are personally liable for the obligations and liabilities of the general partnership, your partner needs to realize that she is obligated as a general partner and come to an agreement with you as quickly as possible. As a suggestion going forward, a general partnership should never be used to operate a business, to hold assets or for any other purpose in Arizona unless there are special circumstances that dictate using a general partnership such as an investment partnership. I would suggest a limited liability company or an S corporation as an appropriate legal entity for you to protect your personal assets( assuming you do not personally guarantee any corporate obligations). While the right legal entity will not guarantee you success going forward, it will help you sleep better at night.

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