2.
Re: Credit Partner Liability Jan 5, 2009 6:48 PM
in response to:
nikki_girl
It sounds as though two different concepts are mixed together in your explanation.
If your friend's intent is to make you a member of the LLC, then you will be a business partner, and (assuming that the business has no credit standing) you will almost surely be required to personally guarantee any loan or credit that the business receives. So, yes, those creditors could and would go after you personally if the business defaulted or failed to pay. Further, if you were a member (but not a manager) of the LLC, you'd have no voice in the operation of the firm (she could basically use your money however she wanted). If your desire to materially
invest in this business, but to protect your personal assets, then a different approach (as suggested in the previous post) would be better for you.
On the other hand, a
credit partner (as the term is normally used in my experience) would not be a member of the LLC, but rather a sort of "go between." For example, suppose your friend needed a $50,000 piece of equipment to launch the business, yet neither she nor the business could qualify to buy it (and you could). You would buy the equipment using your credit, then make a lease-to-buy agreement with her where she paid you more each month than the payments you were making. It's a good deal for you because you get "money for nothing" every month, but it's still a good deal for her because even though she is paying a premium, she wouldn't be able to get the equipment any other way (and she's paying that premium to you, her friend, so she doesn't mind). When the equipment is paid off, the business owns it and you're free and clear. If the business defaulted before that or she didn't pay, then you could take your equipment back. Your main risk would be if she damaged it such that you couldn't return/resell it and recover what you still owed.
Does that make sense? Good luck.
