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Archive for for April, 2015

Personal Liability of Business Owners – Post 6

April 30, 2015

Post 6

This will be a multi-post blog entry.  This sixth post discusses how a business deadlock can impose indirect personal liability on business owners for certain obligations that may be neglected because the business is at crossroads between multiple owners.

Post 6 – Personal Liability Pursuant To a Business Deadlock

Even though powers and duties of running the business may be appropriately delegated, business deadlocks may still occur. One or more owners may disagree with the other on certain decisions such as merging (sale or acquisition); consolidating with or acquiring a competitor; going public; incurring significant capital expenditures; pursuing business expansion endeavors; or other decisions, strategic or operational.… Read the rest

Personal Liability of Business Owner – Post 5

April 28, 2015

Post 5

This will be a multi-post blog entry.  This fifth post discusses spousal consents in the context of governing documents, a lack of which may entitle an outgoing spouse in a divorce, to a share in the Business ownership.

Post 5 – Spousal Rights to Company Ownership in case of Divorce

When individuals form a new Business or enter into an existing one, the business owners initially deliberate upon their inter se rights, powers and roles in running the Business.… Read the rest

Business Divorces – Post 9

April 23, 2015

Post 9

This series focuses on “business divorce,” the break-up of a business between business owners due to disagreement or other circumstances.  A business break-up leads to either one owner continuing the business without the other owner, the forced sale of the business to a third party, or a total dissolution or winding up of the affairs of the business.  Because the situation can be contentious, it may lead to unnecessary litigation.  Shutting a business is often not a viable option, so it may be better for one member to either buy out the other member or sell its stake to the other member. … Read the rest

Personal Liability of Business Owners – Post 4

April 22, 2015

Post 4

This will be a multi-post blog entry.  This fourth post discusses how liability of owners and managers can be limited under governing documents in order to prevent personal liability.

Post 4 – Personal Liability Due to Bad Company Agreement – Limitation of Liability

We discussed in an earlier blog post that governing documents should have certain protections relating to additional capital contributions by owners, the lack of which might lead to uncapped liability for the owners of a Business. … Read the rest

Business Divorces – Post 8

April 21, 2015

Post 8

This series focuses on “business divorce,” the break-up of a business between business owners due to disagreement or other circumstances.  A business break-up leads to either one owner continuing the business without the other owner, the forced sale of the business to a third party, or a total dissolution or winding up of the affairs of the business.  Because the situation can be contentious, it may lead to unnecessary litigation.  Shutting a business is often not a viable option, so it may be better for one member to either buy out the other member or sell its stake to the other member. … Read the rest

Personal Liability of Business Owners – Post 3

April 20, 2015

Post 3

This will be a multi-post blog entry.  This third post discusses liability of owners due to inadequately drafted company agreements among the owners.

Post 3 – Personal Liability Due to Improperly Drafted Documents

Corporations and LLCs provide their owners with protection from personal liability as a matter of law.  These entities are typically regulated internally in accordance with their governing documents, such as certificate of formation, limited liability company agreement, bylaws, etc., depending on the type of entity.  While statutes generally provide for certain default rules regarding governance, it is nonetheless imperative to have customized documents to meet the Businesses’ specific needs.… Read the rest

Personal Liability of Business Owners – Post 2

April 17, 2015

Post 2

This will be a multi-post blog entry.  This second post discusses certain circumstances when courts may not uphold the liability shield of LLCs or corporations but pierce it to hold the owners liable.

Post 2 – Piercing of Corporate Veil

Although corporations and LLCs generally provide their owners (shareholders and members, respectively) a liability shield from business debs, certain factors may compel the courts to “pierce the corporate veil” to hold the owners, officers, and directors of the Business personally liable. … Read the rest

Business Divorces – Post 7

April 16, 2015

Post 7

This series focuses on “business divorce,” the break-up of a business between business owners due to disagreement or other circumstances.  A business break-up leads to either one owner continuing the business without the other owner, the forced sale of the business to a third party, or a total dissolution or winding up of the affairs of the business.  Because the situation can be contentious, it may lead to unnecessary litigation.  Shutting a business is often not a viable option, so it may be better for one member to either buy out the other member or sell its stake to the other member. … Read the rest

All postings are intended to be planning tools to familiarize readers with some of the high-level issues discussed therein. No posting is intended to be a comprehensive discussion and additional details should be discussed with your transaction planners including attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. This article should not be treated as legal advice to any person or entity.