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Real Estate Matters: Breaking up is hard to do, especially when an LLC is involved

By Ilyce Glink and Samuel J. Tamkin, Tribune Content Agency on

Q: I have an ex-partner who talked me into putting my house into a limited liability company (LLC) with her as the managing member. She has total say and control over the LLC, but we are 50/50 owners in the company. The purpose of the LLC was for investment.

She was going to run a business of renting the property through the company and handle all the expenses and filings. However, no business has ever been done with the LLC, no bank account created and now the LLC is in administrative dissolution.

Can I file to dissolve the LLC? If I do, how do I get my home out of the LLC? What tax problems will I have? The LLC was set up with her Social Security number and name and has an EIN number.

I know now the whole thing was a bad idea, but my goal is to get the property out of the LLC and into my name.

A: Have you talked to your ex-partner about the situation to see if the two of you can resolve your differences? As a start, you need to ask her to convey the property to you. If she is willing to do that, great. But we're going to assume she's not going to help you out; at least not willingly.

In fact, we're going to have to make a bunch of assumptions, as there is a fair amount of detail missing from your email, such as whether you and your ex-partner were married (making her your ex-spouse) or were just business partners. We're also unclear as to whether you and your ex-partner actually lived in the property together.

 

First, we're going to assume that you and your ex-partner no longer live in the home, as you mentioned that the home was going to be used as an investment property for what we assume was a rental property business.

We're also going to assume you were married and are now divorced. If that's the case, one important factor is whether you put the home into the LLC before or after your divorce. If you put the property into the LLC before your divorce, the divorce decree should have dealt with the LLC and the disposition of the home. So, if you have some legal direction from your divorce decree as to who owns the LLC and the property it holds, that may give you some leverage to have your ex-spouse convey the property as required by the divorce decree.

Having said that, it may be that you are not divorced (yet?!) or were never married to your ex-partner in the first place. It's also possible that there is no paperwork about the LLC other than the documentation that was used to create it.

As a member of the LLC, though not the managing member, you may have some rights and some of those rights should be described in the operating agreement for the LLC. You should find the operating agreement and determine whether it contains a dispute resolution provision. That dispute resolution provision may give you the right to take some action, perhaps enough to prod your ex-partner into motion.

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(c) 2020 ILYCE R. GLINK AND SAMUEL J. TAMKIN. DISTRIBUTED BY TRIBUNECONTENT AGENCY, LLC.
 

 

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