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Re lease and business partnership agreement

Asked over 2 years ago - Marina Del Rey, CA

a couple of questions
1. IF my possible new partnership comes into effect with my fiance on his existing sole proprietorship can we draft an agreement that any previous debts and lawsuits prior to the date of filing our new agreement that I will not be held liable or responsible in any shape form or matter in or out of a court of law. Would this be enough to protect me.
2. If the business remains in the same name- could we lose the business due to his lack of payment to these existing debts- and lawsuits or will the business be protected at all and could these people come after me as well.

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Attorney answers (2)

Dana Howard Shultz

Reputation Level 15

Answered over 2 years ago. Business Attorney in Oakland, CA.

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You should enter into a purchase and sale agreement by which the new business entity owned by the two of you (further discussion below) purchases the sole proprietorship. The agreement can and should provide that all obligations and liabilities incurred prior to the purchase date remain the responsibility of the sole proprietor (former owner).

Irrespective of any pre-existing sole proprietorship obligations, you should seriously consider forming a limited liability company (LLC), rather than a partnership, to limit your personal liability. The blog post at the link below provides some comparisons between LLCs and corporations as startup entities.

There is an old adage about anyone can sue you at any time. You may not be able to prevent a lawsuit, but taking the steps described above can help you to better defend that suit (and yourself).

Disclaimer: This post does not constitute legal advice and does not establish an attorney-client relationship.

Choosing between LLC and corporation

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Richard F Hamlin

Reputation Level 11

Answered over 2 years ago. Real Estate Attorney in Los Angeles, CA.

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It sounds as if you are considering entering into a business partnership with someone who has not paid earlier debts, and who has been sued more than once by creditors. How smart is that?

Also, if this business is successful, why hasn't he paid his creditors? If it is not successful, what will change if you enter into a partnership with him?

It sounds as though you have posted several questions on this subject over the last couple of days. Depending on what agreement you make with your fiance and how you and he operate the business, you could end up owing money to his creditors. As his partner, he could enter into new obligations on behalf of the partnership and you would be liable for them.

If you want to go into business with this guy, hire your own attorney to protect your own hard-earned assets.

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