Ask a Lawyer - Archive

I sold my business and held part of the loan for interest paid over 3 years and the full amount then paid to me. It's 2 years, the buyer is in default, filed chapter 13 with her husband. She is an LLC with the business, so my lawyer said I am not on the list of crediters, so I don't get my money. She keeps the business, her house, everything. If it is not illegal, it is immoral. My lawyer says I can take back the business, I don't want it. I live in another state now, the lease was transfered to her. Am I responsible for that lease if I take it back? How do I go about selling it after she has nearly run it into the ground? It was an incredible British shop/tearoom, and it was not the economy that bought it down, she made a mess of it from the start.

While there are a lot of facts missing here, it sounds like you let this person buy your business through an LLC but did not get a personal guarantee from her on the deferred portion of the purchase price. If this is the case, it may be true that you would be a creditor of the LLC and not her personally so she would not have been required to list you as a creditor in the Chapter 13 bankruptcy. It sounds like you still have a security interest in the business but you don't think it is now worth taking back. If it is not too late, there may be something you can do to try to intervene in the bankruptcy to see if you could make a claim against her personally (e.g., trying to pierce the limited liability shield of the LLC). If your lawyer does not have expertise in this area, go see someone who does. Otherwise, a word of advise to anyone selling a small business is that it is sometimes better to take less money on the purchase price and get paid everything up front. If you do have to take back a promissory note from an LLC or corporate buyer, be sure it is personally guaranteed by the owners.