I'm getting sued if I do not meet terms for repayment of an investment for a startup LLC from a friend. What are my options?

Asked about 1 year ago - San Jose, CA

He invested $30,000 towards a company I started a couple of months after I launched. On the contract, I would agree to give 11% of the company and I would have to pay it back in a year. The entire 30k and more was spent on office space and startup costs. We didn't resign the lease because the company was not generating enough money, it is now a home-based business again and is not profitable at this point. I told the investor that the company cannot pay the entire 30k at this time due to the lack of profits. He insisted that I take out a business loan to pay him and I said no, I would rather pay him what the company can afford on a monthly basis. I get a letter from a law firm stating that I must pay 5k a month for 6 months or I will get sued. What can I do?

Attorney answers (5)

  1. John David Laurie

    Pro

    Contributor Level 13

    7

    Lawyers agree

    Answered . You should seek legal advice and let the attorney review all the documents and give you some legal advice.

  2. Kevin Samuel Sullivan

    Pro

    Contributor Level 20

    5

    Lawyers agree

    Answered . you need to have an attorney review your documents.

  3. Charles Michael Standard

    Contributor Level 9

    4

    Lawyers agree

    Answered . Before answering your question it would be necessary to review the partnership/loan contract. Please feel free to contact me for a free consultation. 408 796-9616

  4. Scott Richard Kaufman

    Contributor Level 20

    3

    Lawyers agree

    Answered . Based solely on your facts as posted, I recommend taking the offer to pay 5K a month for 6 months. They unilaterally offered to change the terms you agreed to just to make it affordable to you. Seems like a good chance to avoid a lawsuit...

  5. John P Corrigan

    Contributor Level 19

    2

    Lawyers agree

    Answered . Not really possible to give a good answer absent reading the investment/loan document to determine if the LLC is solely liable or whether you were also a party either agreeing to be a co-borrower or possibly a personal guarantor. Your choice will be predicated on the answer to these questions. If you are not liable contractually then you could simply bankrupt the LLC and tell the investor/creditor to pound sand .....or if you personally are on the hook then you may want to take a more conciliatory approach and seek a forbearance greement or possibly an amendment to the loan to allow for more reasonable terms that consider your cash-flow limitations.

    My answer is not intended to be giving legal advice and this topic can be a complex area where the advice of a... more

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