Personal Guarantee Expiring, What are my options?

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Latest post 11-04-2009 4:43 PM by Drew. 5 replies.
  • 11-04-2009 12:03 PM

    Personal Guarantee Expiring, What are my options?

    I am a business owner in Texas and signed a five year commercial lease under my single member LLC.  I negotiated a 3 year personal guarantee (instead of all five years) into the lease and I have been open just over two years and am eleven months away from hitting the three year mark.  I have paid all my rent on time and have done everything else required for the personal guarantee to end after three years.  My landlord has been excessive in their triple net increases and I am now paying double the original rate.  My business is breaking even, but is not returning the profit I had hoped.  I have tried selling, but have not had any success doing so and would like to pursue other business opportunities and would welcome feedback on my option... personal guarantee expires.  I have approximately $50,000 worth of equipment in my business that I am leasing to buy and still have three years remaining on the lease that I will pay off.  Here are my questions:

    1.  If I decide to close my business after my personal guarantee expires, but still have approximately two years remaining on my lease, what (realistically) are my personal risks/obligations to my landlord for the balance of the lease term?

    2.  If I decide to close my business after 3 years, I assume I should try and sell or remove my equipment first and also dissolve my LLC.  Please advise on any suggestions regarding procedures or steps to take and how one dissolves an LLC.

    3. What other recommendations would you suggest to limit my personal financial exposure?

    4.  Any other advice or things to be aware of?

    Thanks in advance for your learned feedback, it is very much appreciated!

     

     

  • 11-04-2009 1:55 PM In reply to

    Re: Personal Guarantee Expiring, What are my options?

    I'm not following---I'd think your want to get to 3 years + 1 day with no breech of the lease and have your personal guarantee expire and have the LLC be alive but as broke as you can possibly make it and most equipment and inventory of value removed from premises (if such is not a violation of the lease--or at least violate the lease AFTER personal guarantee expires.) 

     

    Did you guarantee the original rents or is it written in way that you also guaranteed future pass thru rents.

     

    I think you want to very careful NOT to trigger a breech before personal guarantee runs out! Unless your personal bucket is very judgement resistant

     

  • 11-04-2009 3:45 PM In reply to

    Re: Personal Guarantee Expiring, What are my options?

    Thanks for the response and to clarify, I would do nothing until after my personal guarantee expires.  I would be in full compliance of all the terms of my lease before taking any of my proposed actions.

    The lease states that "tenant" (which is my LLC) is still liable if I sold or sub-leased my space.

    The wording we added to limit my personal guaranty states that if tenant or subtenant has paid rental amount due for the first three years of this lease, then said guarantee expires, is released and shall no longer be enforceable.

    I look forward to reading your response, thanks.

     

     

     

  • 11-04-2009 3:59 PM In reply to

    Re: Personal Guarantee Expiring, What are my options?

    Then I repeat my view of getting to 3yrs + 1 day  w/o breech of lease at your end. The you seem to be safe to pull the plug--and only LLC gets hit and you can tailore taht a bit.

     

  • 11-04-2009 4:39 PM In reply to

    Re: Personal Guarantee Expiring, What are my options?

    Thanks and would you elaborate on "only LLC gets hit and you can tailore taht a bit"?

    I assume once I dissolve my LLC the landlord cannot (successfully) try to come after me personally, right?

    Any other suggestions to limit my liability would be welcome.

  • 11-04-2009 4:43 PM In reply to

    Re: Personal Guarantee Expiring, What are my options?

    No, I mean leave near empty shell of LLC to take the hit.

     

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