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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?

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?

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Attorney answers 5

Posted

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

Posted

you need to have an attorney review your documents.

Posted

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

Posted

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...

Posted

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 licensed attorney in your State should be obtained. Please click "helpful" or "best answer" if my answer added any value or add a "comment" if you have more info for me to help you get a better answer.

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