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Tagged Posts: LLC’

Covenant Not To Compete When Buying or Selling a Business (Part II)

June 28, 2016

California: It All Comes Down to Goodwill.

Generally speaking, non-competes are void under California law.[1]  Exceptions do exist.  In the context of the sale of goodwill in a business, for example, the seller may agree not to compete with the buyer so long as the buyer carries on a like business.[2]  This makes sense because it would be unfair for the seller to engage in a competitive business that diminishes the value of the business sold.  So how does this work in practice?… Read the rest

Shawn McBride Talks About Business Partnership in a Podcast Interview with My Time Is Now

June 21, 2016

What’s Love Got To Do with Business Partnerships and Business Laws.

On June 21, 2016, Shawn will be featured in a podcast interview with Charlene Gilman, a producer of a weekly podcast titled “My Time Is Now” that airs every Tuesday with a worldwide audience covering United States, South Africa, and Australia.  In this interview, Shawn talks about how business partnerships can quickly go sideways when business laws are ignored during business changes and shares some tips on keeping business partnerships healthy and successful. … Read the rest

Covenant Not To Compete When Buying or Selling a Business (Part I)

June 16, 2016

If your business employs skilled workers, or you have been one, you may be familiar with non-compete agreement, also known as covenant not to compete.  For those who are less familiar with the subject, it is a contractual provision under which one party agrees not to compete in the same business, usually for a specific time period and/or in a defined geographic area.  For example, in the context of employment, an employee may sign an employment agreement and agree not to work for a competitor of the employer for, say, three years after termination of the employment. … Read the rest

Charging Orders: Is a Creditor of an LLC Member Necessarily a Creditor of the LLC? (Part II)

May 31, 2016

Merrill Ranch Properties, LLC v. Austell[1] involved a bank loan to an LLC, secured by certain property in Arizona and guaranteed by an affiliated individual and eight trust entities he controlled.  At some point, the loan was declared in default and the bank filed a lawsuit in Arizona against the borrower and the guarantors to recover the balance of the loan.  The lawsuit eventually settled.  Subsequently, however, the plaintiff discovered that shortly after the loan was declared in default, three LLCs with corporate relationships to the guarantor transferred certain assets to various newly-created entities that were, in turn, directly or indirectly owned by trusts controlled by the guarantor.  … Read the rest

Charging Orders: Is a Creditor of an LLC Member Necessarily a Creditor of the LLC? (Part I)

May 24, 2016

In our previous blog series on Comparison of LLC Statutes, we briefly touched on the concept of LLC charging order.  In many states, including Delaware, New York, and Texas, a creditor with a judgment against an LLC member can apply for a charging order to satisfy the judgment.  That way, the creditor gets the right to receive distributions from the LLC to which the debtor/member would otherwise have been entitled.  A charging order may or may not be the exclusive remedy by which a creditor may satisfy a judgment out of the debtor’s LLC interest, depending on the jurisdiction, and this can make a big difference if the LLC does not make any distributions.… Read the rest

Business Divorces: What Happens When Partners Separate

January 26, 2016

A Delaware Case: Meissner v. Yun. In our previous blog series on business divorce (available here), we focused on the break-up between two or more business owners due to disagreement or other circumstances, leading to a deadlock, forced sale of the business, or total dissolution. Oftentimes, disputes arise either because there is no written agreement, or if there is, it is poorly drafted, inadequately addressing keys terms like ownership, buy-out, and dispute resolution mechanisms. As we emphasized over and over, the importance of advance planning and carefully thought-out “business prenup” should not be underestimated.… Read the rest

Personal Liability of Business Owners Update: You Don’t Buy Immunity from Suits for Your Own Wrongdoing by Forming an LLC: LLC Member’s Personal Liability for Torts

January 12, 2016

As many of you know, one of the greatest advantages of forming an LLC is that it offers protection from personal liability for business debts and liabilities. As we explained in our previous blog series “Personal Liability of Business Owners,” however, the liability shield is not absolute, and there are limited circumstances in which courts will impose personal liability on LLC owners. One such situation is where a member or manager commits a tort (wrongful act) while acting in furtherance of LLC business, the consequence of which is often misunderstood by LLC owners (and even some lawyers).… Read the rest

Will Your Personal Obligations Cause You To Lose Control of Your LLC? LLC Charging Order Update: Vision Marketing Resources, Inc. v. McMillin Group, LLC (Part 2)

December 29, 2015

Vision Marketing Resources, Inc. v. McMillin Group, LLC.

 In Vision Marketing, the court first addressed whether it could issue a charging order against a non-Kansas LLC over which it did not have jurisdiction. There was no Kansas case law on this issue, so the court looked at several cases in which other state’s appellate courts held that the court need not have jurisdiction over the foreign LLC (i.e., those formed elsewhere) in order to issue a charging order against the interests of its members: for example, the Illinois Appellate Court found that a court only needs to have jurisdiction over the judgment debtor to enter charging orders against the judgment debtor’s interest, because charging orders on distributional interests do not affect the rights or interests of the LLC; and in Georgia, the Court of Appeals has likewise held that it is only necessary for a court to have jurisdiction over the judgment debtor to have the authority to enter charging orders against the judgment debtor’s interest because the LLC has no right or direct interest that is affected by the charging order.… 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.