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H Richard Keyt Jr

H Keyt’s Answers

64 total


  • Can an LLC owner be sued personally?

    Someone told me that a customer could sue the LLC and me personally. But I don't think that's right. I'm deciding whether to be a sole proprietor or have an LLC. Liability protection is my main concern. If an LLC will not protect me, I don't s...

    H’s Answer

    The general rule is that the owners (called members) of an LLC are not liable for the debts and obligations of the LLC. There are exceptions, however, to the general rule. The biggest exceptions are:

    1. The owner is always liable for his or her misconduct that causes harm. If you are driving a cab for your LLC that operates a cab business and you run a red light and kill or injure somebody, you will be sued and you will be liable because you ran the red light. It is not a defense to the lawsuit that you were working for the LLC at the time you ran the red light. P.S. The LLC will also be sued and be liable because you were working for the LLC when you ran the red light.

    2. Often a member is required to sign a personal guaranty as a condition to the LLC engaging in a business transaction. Common transactions involving personal guaranties are loans to the LLC and leases of real estate to the LLC. Lenders and landlords frequently require the members of the LLC to sign a personal guaranty. This is a contract in which the signer(s) agree to satisfy or pay the LLC's debts and obligations if the LLC fails to do so. If you want to minimize your liability for the LLC's debts or obiligations, do not sign any personal guaranties.

    There are also other ways that an owner of an LLC can become liable for the LLC's debts and obligations. The bottom line however is easily summarized as follows:

    1. Never EVER EVER operate a business as a sole proprietorship or a general partnership because if you do, you are 100% LIABLE for EVERYTHING that goes wrong.

    2. Always operate a business through a corporation, limited liability company or limited partnership because the general rule is the owners (other than general partners of LPs) are not liable for the debts or obligations of these types of entities.

    It is a no-brainer. Sometimes liable is better than always liable.

    Consult with an experienced business lawyer in the state where you will operate a business to determine which type of entity is best for that state.

    My response to your question(s) is not legal advice for your specific situation. My response discusses general legal concepts. The fact I responded to your question(s) does not create an attorney client relationship between you and me. Because I am licensed to practice law only in Arizona, my statements are general statements about Arizona LLC law rather than the law of any other state. The facts of your situation and the applicable federal and state law must be considered before taking action. I recommend that you contact an experienced attorney who is licensed to practice law in the jurisdiction that will govern your specific transaction and who has experience with the specific areas of law applicable to your situation.

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  • Discuss Please

    Jonathan, Gary, and Ricardo are active members of a partnership called Swim City. The partnership manufactures, sells, and installs outdoor swimming pools in the states of Arkansas and Texas. The partners want to continue to be active in the man...

    H’s Answer

    Repeat after me three times: Never ever ever operate a business as a general partnership because EVERY partner is 100% liable for everything that goes wrong!!! Always operate a business through a corporation or a limited liability company. Ask a business attorney in the state where you will form the entity which of these two types of entities is best in that state for your business.

    My response to your question(s) is not legal advice for your specific situation. My response discusses general legal concepts. The fact I responded to your question(s) does not create an attorney client relationship between you and me. Because I am licensed to practice law only in Arizona, my statements are general statements about Arizona LLC law rather than the law of any other state. The facts of your situation and the applicable federal and state law must be considered before taking action. I recommend that you contact an experienced attorney who is licensed to practice law in the jurisdiction that will govern your specific transaction and who has experience with the specific areas of law applicable to your situation.

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  • I own 50% of a California LLC that owns three properties. Can I sell my 50% to anybody or do I need the approval of my partners?

    Two are income properties. The third one is a house in foreclosure.

    H’s Answer

    Did the members sign an agreement that restricts or prohibits transfers? If so, you are bound by the agreement. If not, you will need to research California LLC law or consult with a California LLC lawyer for your answer.

    In Arizona, where I have formed over 2,450 Arizona LLCs, the law provides that a member of an Arizona LLC is free to transfer membership of the LLC to any person or entity unless the members have signed an agreement (usually called an Operating Agreement) that restricts or prohibits the transfer.

    My response to your question(s) is not legal advice for your specific situation. My response discusses general legal concepts. The fact I responded to your question(s) does not create an attorney client relationship between you and me. Because I am licensed to practice law only in Arizona, my statements are general statements about Arizona LLC law rather than the law of any other state. The facts of your situation and the applicable federal and state law must be considered before taking action. I recommend that you contact an experienced attorney who is licensed to practice law in the jurisdiction that will govern your specific transaction and who has experience with the specific areas of law applicable to your situation.

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  • I would like to form a fitness llc in arizona.

    On page 4 of 4 of the llc agreement i have printed off of azcc.gov it asks if i want to "reserved to the members" or "vested in managers". I am not sure which one to choose and would like some help. I am basically looking to start a fitness boot c...

    H’s Answer

    Arizona LLC law requires that the Articles of Organization filed with the Arizona Corporation Commission to form the LLC state if the LLC will be member managed or manager managed. Here's the difference:

    1. If you select member managed, all members have management power and can sign contracts for the LLC and bind the LLC on legal obligations. This is true whether the member owns 1% or 99%.

    2. If you select manager managed, then no member has management power unless the member is also a manager. In manager managed LLCs, only managers have management power and can sign contracts on behalf of the LLC and bind the LLC on legal obligations.

    As an Arizona LLC attorney who has formed over 2,450 Arizona LLCs, I have never once formed a member managed LLC. Every LLC I form is manager managed because I want the members to always be able to determine who will have management power. In a manager managed LLC, the members elect the managers. Many times in a single member LLC, the sole member will also be a manager. Manager managed LLCs must have at least one manager.

    For more on forming Arizona LLCs, see my article called "How to Form an Arizona LLC" found at:

    http://www.keytlaw.com/az/formllc.htm

    I suggest you download a copy of my free article called "10 Critical Facts Every LLC Owner Must Know" found here:

    http://www.keytlaw.com/10facts/index.htm

    To learn more about operating an Arizona LLC, I suggest you buy my ebook called the "Arizona LLC Quick Start Guide" found here:

    http://www.keytlaw.com/azllc/qsg.htm

    The book covers over 75 topics related to operating an Arizona LLC.

    My response to your question(s) is not legal advice for your specific situation. My response discusses general legal concepts. The fact I responded to your question(s) does not create an attorney client relationship between you and me. Because I am licensed to practice law only in Arizona, my statements are general statements about Arizona LLC law rather than the law of any other state. The facts of your situation and the applicable federal and state law must be considered before taking action. I recommend that you contact an experienced attorney who is licensed to practice law in the jurisdiction that will govern your specific transaction and who has experience with the specific areas of law applicable to your situation.

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  • I am L2 Visa, Can I start a Company in US?

    I am L2 Visa, Can I start a Company in US? If yes, what are required doc's required

    H’s Answer

    I am an Arizona business lawyer who has formed over 2,450 Arizona limited liability companies, many of which are owned by people who are not U.S. citizens or U.S. residents. Arizona law does not restrict ownership of Arizona corporations, LLCs or limited partnerships to U.S. citizens or U.S. residents.

    See my article called "How to Form an Arizona Limited Liability Company" found here:

    http://www.keytlaw.com/az/formllc.htm

    My response to your question(s) is not legal advice for your specific situation. My response discusses general legal concepts. The fact I responded to your question(s) does not create an attorney client relationship between you and me. Because I am licensed to practice law only in Arizona, my statements are general statements about Arizona LLC law rather than the law of any other state. The facts of your situation and the applicable federal and state law must be considered before taking action. I recommend that you contact an experienced attorney who is licensed to practice law in the jurisdiction that will govern your specific transaction and who has experience with the specific areas of law applicable to your situation.

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  • Removal of company officer

    I have a less than 1 year old LLC, I am the member with the largest share. One of the other members was just arrested for tax evasion from several years ago on his personal taxes. I have removed him from the corporate bank account and filed a ce...

    H’s Answer

    On what basis did you allegedly terminate the other member's interest in the LLC? Did you do it with the approval of the other member? Was the other member adequately compensated for surrendering the member's interest?

    Did you attempt to terminate the other member's interest in the LLC unilaterally without the knowledge or consent of the other member and without any legal basis? What gives you the legal right to forfeit the interest of another member?

    Your question illustrates one of the many reasons why all multi-member LLCs need a good Operating Agreement with buy-sell provisions. In Arizona where I have formed over 2,450 Arizona LLCs, members of an Arizona LLC who do not sign an agreement that contains company divorce provisions, aka exit provisions, are stuck with each other for life unless:

    1. they agree on how to carry out a company divorce, or

    2. one of the members files a lawsuit and asks the superior court to judicially dissolve the LLC.

    I recommend that you consult with an experienced LLC attorney in the state where your LLC was formed to see what your options are and if you may have created liability for yourself arising from your unilateral attempt to oust the other member.

    My response to your question(s) is not legal advice for your specific situation. My response discusses general legal concepts. The fact I responded to your question(s) does not create an attorney client relationship between you and me. Because I am licensed to practice law only in Arizona, my statements are general statements about Arizona LLC law rather than the law of any other state. The facts of your situation and the applicable federal and state law must be considered before taking action. I recommend that you contact an experienced attorney who is licensed to practice law in the jurisdiction that will govern your specific transaction and who has experience with the specific areas of law applicable to your situation.

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  • My house was bought for$451,000. after moving in we began detecting multiple major deefects found it had mutiple faults

    over the last 5 yrs major defects in roof structure,foundation,electric plumping. have been discovered. Estamates to fix range from 149,000 to 225,000. at what point is this place condemable and would that do us any good?

    H’s Answer

    Arizona law requires the seller of Arizona real estate to disclose to the buyer of the real estate all material facts concerning the property. If the seller fails to do so, the buyer has a claim against the seller for damages arising from the failure to disclose all material facts.

    I recommend that you consult with an experienced Arizona real estate lawyer as soon as possible to discuss your situation and your possible courses of action before the applicable statutes of limitations runs.

    My response to your question(s) is not legal advice for your specific situation. My response discusses general legal concepts. The fact I responded to your question(s) does not create an attorney client relationship between you and me. Because I am licensed to practice law only in Arizona, my statements are general statements about Arizona law rather than the law of any other state. The facts of your situation and the applicable federal and state law must be considered before taking action. I recommend that you contact an experienced attorney who is licensed to practice law in the jurisdiction that will govern your specific transaction and who has experience with the specific areas of law applicable to your situation.

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  • What can I do to get the owner of the land I purchased to sign the title over to us?

    We purchased land using a letter that was notarized between the two parties, the owner will not sign the land over and the land has paid off for a year. He is claiming we were late on a payment, I sent him money for the late payment from when he ...

    H’s Answer

    Assuming you are dealing with Arizona real property, then as an Arizona real estate lawyer my advice is that you should immediately consult with an experienced Arizona real estate attorney to discuss your options. Arizona law says that an agreement to convey Arizona real property is not enforceable unless the agreement is in writing. The first question your lawyer needs to answer is if you have an enforceable contract to buy Arizona land.

    It is very much a problem for you that the seller did not deed the property to you and you did not get title insurance.

    You may have to file a lawsuit asking for the court to order the seller to convey the land to you. This type of lawsuit is called a lawsuit for specific performance. You ask the court to enforce the terms and conditions of the contract.

    Note: If you have a valid contract for the purchase of Arizona land, the seller cannot cause you to forfeit your interest in the land without first complying with Arizona's forfeiture of real property laws found in Arizona Revised Statutes Section 33-741 et. seq. ARS Section 33-742.A states:

    "If a purchaser is in default by failing to pay monies due under the contract, a seller may, after expiration of the applicable period stated in subsection D of this section and after serving the notice of election to forfeit stated in section 33-743, complete the forfeiture of the purchaser's interest in the property in the manner provided by section 33-744 or 33-745."

    ARS Section 33-741.2 states:

    "Contract" means a contract for conveyance of real property, a contract for deed, a contract to convey, an agreement for sale or any similar contract through which a seller has conveyed to a purchaser equitable title in property and under which the seller is obligated to convey to the purchaser the remainder of the seller's title in the property, whether legal or equitable, on payment in full of all monies due under the contract."

    Do not delay. You need to consult an experienced Arizona real estate lawyer immediately before something happens that could jeopardize your case.

    My response to your question(s) is not legal advice for your specific situation. My response discusses general legal concepts. The fact I responded to your question(s) does not create an attorney client relationship between you and me. Because I am licensed to practice law only in Arizona, my statements are general statements about Arizona law rather than the law of any other state. The facts of your situation and the applicable federal and state law must be considered before taking action. I recommend that you contact an experienced attorney who is licensed to practice law in the jurisdiction that will govern your specific transaction and who has experience with the specific areas of law applicable to your situation.

    See question 
  • Best way for a CPA to organize to protect against personal liability?

    My wife is a FL CPA. We (her husband, non CPA) want to organize ourselves as a professional limited liability corporation to avoid personal liability for errors or ommissions. FL's CPA firm application requires us to affirm we have at least 50K ...

    H’s Answer

    An entity never protects you from harm that you cause. If you are driving a cab for your 100% owned LLC or corporation and you run a red light and kill or injure somebody, you are personally liable for the damages caused by your conduct. In this example, both you and your LLC will be sued and be liable.

    The reason you should always purchase the largest and most comprehensive insurance policy you can afford is because insurance is your first line of defense if you get sued for you acts or omissions.

    You form LLCs and corporations to protect yourself from the debts and obligations of the entity, including, but not limited to harm caused by other people on behalf of the entity.

    My response to your question(s) is not legal advice for your specific situation. My response discusses general legal concepts. The fact I responded to your question(s) does not create an attorney client relationship between you and me. Because I am licensed to practice law only in Arizona, my statements are general statements about Arizona LLC law rather than the law of any other state. The facts of your situation and the applicable federal and state law must be considered before taking action. I recommend that you contact an experienced attorney who is licensed to practice law in the jurisdiction that will govern your specific transaction and who has experience with the specific areas of law applicable to your situation.

    See question 
  • Similar to having shares of stock be represented by stock certificates, how is investing in an LLC represented?

    Similar to having shares of stock be represented by stock certificates, how is investing in an LLC represented? If one was to write a check for investment purposes and the check is deposited, etc and you are hoping to receive a return on the inves...

    H’s Answer

    The answer to your question depends on the law of the state in which the LLC was formed.

    I am an Arizona LLC lawyer who has formed over 2,450 Arizona LLCs. Arizona LLC law does not provide for any specific evidence of the ownership of an Arizona LLC other than:

    1. The Articles of Organization of a member managed LLC must state the name of every member.

    2. The Articles of Organization of a manager managed LLC must state the name of only those members who own 20% or more of the LLC.

    The Articles of Organization of an Arizona LLC are not required to state the percentage ownership of any member.

    Thus, although ownership of an interest in an Arizona LLC may be determined by looking at the Articles of Organization filed with the Arizona Corporation Commission, the information cannot be relied on because sometimes people fail to list one or more members or members come and go after the date the Articles of Organization were filed.

    The best way to evidence ownership of an interest in an Arizona LLC is by a written contract called an Operating Agreement signed by all of the members. The Operating Agreement should specify who the members are and the percentage of the LLC owned by each member.

    For every LLC that I form, I prepare an Operating Agreement, organizational resolutions signed by all the members and a membership certificate for each member. Each of these documents is evidence of who the members are and their percentage ownership of the LLC. Arizona law does not, however, require that an Arizona LLC have any of these documents.

    Caution: It is always imperative that all the members of the LLC sign an Operating Agreement that specifies who the members are and their percentage of ownership. I have seem far too many situations where people form an LLC with no documentation as to membership and later the members end up in court because they cannot agree on who owns the LLC or their percentage of ownership.

    For more about Arizona LLC law, see my Arizona LLC Law Library at:

    http://www.keytlaw.com/azllc/azllc.htm

    My response to your question(s) is not legal advice for your specific situation. My response discusses general legal concepts. The fact I responded to your question(s) does not create an attorney client relationship between you and me. Because I am licensed to practice law only in Arizona, my statements are general statements about Arizona LLC law rather than the law of any other state. The facts of your situation and the applicable federal and state law must be considered before taking action. I recommend that you contact an experienced attorney who is licensed to practice law in the jurisdiction that will govern your specific transaction and who has experience with the specific areas of law applicable to your situation.

    See question