I am a 50% partner in an LLC and my other partner is leaving the company. she wants to take some of our clients and leave me with the debt. We have only been in business 1 1/2, we lease our space and owe on a loan. We made a small project in 2008. I want to continue on as sole owner, and am trying to figure out how to split without it getting ugly. Any ideas? I think she should at least take half of the debt.

Tammy

Examine the Operating Agreement for any 'divorce' provisions (which are usually found in standard boilerplate OAs). This section of the OA would provide the procedure and mechanism for unwinding the partnership.

If the OA does in fact cover this topic, then you'll either have to
(1) unwind the biz according to the dictates of the OA, or (2) mutually agree to 'override' the OA, and take a different approach (with "mutually agree" being the key words here!).

Although it seems intuitive at first glance that she should assume 1/2 of the debt, that's not necessarily required. You could, for example, assume her share of the debt (i.e., you take all of it); just make sure that you are fairly compensated for doing so. You might, say, retain the lion's share of the assets (clients?) to make up the diff.

You'll just have to 'value' the assets and the client base--tough but not terribly so. Also, be sure to check the loan agreement to see if there are any 'change of ownership' provisions that might be triggered upon your partner's departure.

Good accounting advice is golden in a situation like this--glad to hear you've got one on it. Ditto good legal advice. Best of luck!


...it was early and I was full of no coffee...