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What can I do when a Limited member of a 2 member LLC encumbered an asset of the LLC without approval of the other party and now

Jacksonville, FL |

Member has no voting rights in the LLC and is not the manager.. The shares are 80/20 the lesser member has obtained a loan in the amount of 280K for renovations on a LLC owned property. without the consent of the manager and signed the loan documents and mortgage acting as the manager. The loan is now in default and the lender is pursuing foreclosure

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Attorney answers 2


You should consult an experienced business lawyer in your area. Documents not executed by someone with either actual or apparent authority are not binding on the LLC. Your lawyer can review your organizational documents and company records and advise you how to proceed.

Disclaimer: This answer is provided for informational purposes only, does not constitute legal advice, and does not create an attorney-client relationship. Actual legal advice can only be provided after completing a comprehensive consultation in which all of the relevant facts are discussed and reviewed.


If the articles of organization filed with the secretary of state shows you and not them as managers, then it may be a problem for this lender because the non-managing member does not have authority to pledge LLC assets as collateral for a loan not approved by the managing members. You should definitely visit with an attorney in the state in which the property sits.