Personal Bankruptcy LLC Bankruptcy

[llcjb]

I am a minority shareholder in a small computer consulting LLC and am also a billable employee. Our business started in Feb, 2005 and at this point we are in serious financial difficulties. We have a Line of Credit that was due on May 1, 2006 but the bank has held off because we are in negotiations to sell the business. The sale has yet to finalize and may not happen at all.

Since Sept, 2005, three of us (owners) have worked but not collected a paycheck. We have done this in good faith since all of the owners promised to make an investment to help with the cash flow issues. They decided not to make the investment in December, 2005.

At the end of the year the majority owner told us there was a company that was interested in buying us and that in order for the deal to go through, we needed to hold the company together. We continued working without compensation.

Now the majority owner wants the LLC to file for bankruptcy and pay off our line of credit (which is personally guaranteed by each of us proportionately based on our percent of ownership.)

Do we have any recourse in getting some or all of our deferred compensation paid back as a liability of the company? Should we agree to the bankruptcy?

Thanks.

 

[Michael Wechsler]

I am a minority shareholder in a small computer consulting LLC and am also a billable employee. Our business started in Feb, 2005 and at this point we are in serious financial difficulties. We have a Line of Credit that was due on May 1, 2006 but the bank has held off because we are in negotiations to sell the business. The sale has yet to finalize and may not happen at all.

Since Sept, 2005, three of us (owners) have worked but not collected a paycheck. We have done this in good faith since all of the owners promised to make an investment to help with the cash flow issues. They decided not to make the investment in December, 2005.

At the end of the year the majority owner told us there was a company that was interested in buying us and that in order for the deal to go through, we needed to hold the company together. We continued working without compensation.

Now the majority owner wants the LLC to file for bankruptcy and pay off our line of credit (which is personally guaranteed by each of us proportionately based on our percent of ownership.)

Do we have any recourse in getting some or all of our deferred compensation paid back as a liability of the company? Should we agree to the bankruptcy?

This sounds like a more complicated matter that is dificult to answer. From what I know, wages owed to employees for the final pay period prior to filing bankruptcy can be priority claims but I'm not sure in this case. Good luck.