How to set up personal real estate into corporation?
My husband and I own a couple of stores and business is down extremely due to the poor economy. We did sign personal guaranty on our lease. We don't want to lose our home so what would be the best solution?
Signing a personal guarantee is a tremendous problem. The landlord can and will come after your assets if you default on the lease. In most states, any transfer of your home when you are in debt and/or insolvent to avoid creditors will be subject to the Fraudulent Conveyance Act. This act states that any transfer will be ineffective to prevent creditors from getting at the transferred asset. So any transfer at this point would not help you.
In the future, try to avoid personal guarantees and especially try to limit the personal guarantee to only one of you, if at all possible.
In any event, you should discuss this matter in more detail with and HI lawyer.
Hope this helps. If you think this post was helpful, please check the thumbs up (helpful) tab below and/or designate my answer as best answer. Thanks.
Mr. Fromm is licensed to practice law in PA with offices in Philadelphia and Montgomery Counties and services clients in all parts of Pennsylvania. He can be reached at 215-735-2336 or at the email address listed below. He has an AV Preeminent Rating (5.0 out of 5.0) with Martindale-Hubbel, the highest possible rating for legal ability and ethical standards. Also, he has received a 10.0 rating from AVVO and recently was featured as a 5Star Wealth Manager in the Philadelphia Magazine, November 2009 issue on page 123.
Mr. Fromm is ethically required to state that the response herein is not legal advice and does not create an attorney/ client relationship. Also, there are no recognized legal specialties under Pennsylvania law. Any references to a trust, estate or tax lawyer refer only to the fact that Mr. Fromm limits his practice to these areas of the law. These responses are only in the form of legal education and are intended to only provide general information about the matter within the question. Oftentimes the question does not include significant and important facts and timelines that if known could significantly change the reply or make such reply unsuitable. Mr. Fromm strongly advises the questioner to confer with an attorney in their state in order to ensure proper advice is received.
By using this site you understand and agree that there is no attorney client relationship or confidentiality between you and the attorney responding. This site should not be used as a substitute for competent legal advice from a licensed attorney that practices in the subject area in your jurisdiction, who is familiar with your specific facts and all of the circumstances and with whom you have an attorney client relationship. The law changes frequently and varies from jurisdiction to jurisdiction. The information and materials provided are general in nature, and may not apply to a specific factual or legal circumstance described in the question or omitted from the question.
Circular 230 Disclaimer - Any information in this comment may not be used to eliminate or reduce penalties by the IRS or any other governmental agency.
I work with landlords and tenants all the time here in the Chicago area. Every street you go down there are commercial vacancies; it's TERRIBLE out there. And the stores that are open are struggling -- especially small businesses, entrepreneurial, etc. And even if Kailua-Kona is the "fancy" side of the Big Island, tourism and exports are down and when that's down the kama 'aina suffer too. So your best solution? Open up a dialogue with your landlord. Look around you - in this economy unless there's someone else ready to take over your space the landlord would be foolish to let it go vacant. Going "dark" makes it worse for everyone. Since it sounds like you've had a long term relationship so fo, hopefully your landlord had good years with you (maybe the last 10-12) and the landlord knows this is not your fault. You may have to test the waters and may have to submit your personal financial statement and tax returns to your landlord to review (which can be risky if the landlord is a jerk -- the landlord may just see you have enough assets to raid to get the rent paid off but leave you penniless), but before you get there you want to set some groundrules that if things are as you say you want a rent reduction (that doesn't accrue against you), any kind of break, or as a "Plan B" you could get a deferral. There may be tax consequences to you but there are ways of dealing with them. There are other options, including attempting to borrow and cover (but this could be short term and then you'd be in a bigger hole), consolidate, bankruptcy, but they are drastic and I don't have enough information here to be helpful at this point. If your landlord turns out to be a jerk, that's a shame but be prepared to deal with it. It may help if you have an attorney open the dialogue, because then the landlord knows you mean business, but if you make a deal with your landlord on your own you can still get into a lot of trouble if the right document isn't written up -- so do please think of hiring an attorney to help? The fees may be the least thing you wind up paying if in the long run the paperwork doesn't help you. Otherwise, hope you have your health and if it helps you feel any better, think of me when it's -20F here in Chicago in a few months. Aloha.