803-254-2200 803-254-2200

For South Carolina business and legal updates:

Blog Posts Tagged "limited liability company, llc"

Creditors’ Rights Trump Ownership Restrictions in LLC Operating Agreements

A recent South Carolina Supreme Court decision affirms the supremacy of creditors’ foreclosure rights, and sounds a cautionary note for LLCs. The state’s high court said that LLCs can’t use an operating agreement to force a creditor to sell a distributional interest it obtained via judicial foreclosure. 

The ruling came in Levy v. Carolinian, LLC, a case involving an LLC that owns an oceanfront hotel. One of the members, who owned about a quarter of the LLC, found himself on the wrong end of a judgment for $2.5 million. Creditors obtained a charging order – essentially a lien – against their debtor’s distributional interest in the LLC. The creditors then foreclosed on its charging lien and purchased the member’s distributional interest at public auction. 

continue reading

Judicial Dissolution of an LLC: Why You Need a Prenupt

The formation of an LLC could be viewed like a business marriage in which members join their respective interests to attain mutual objectives. Keeping the analogy going, it’s a marriage that needs a prenuptial. Members who form or join an LLC may have every intention to keep the LLC going indefinitely, but as life happens and problems arise, dissolution of the entity may be in everyone’s best interests. If the LLC’s operating agreement clearly defines the why’s and how’s for voluntary dissolution (what we mean by prenuptial), the process to windup the company can be relatively easy and accomplished without the need for judicial involvement. However, without a clearly articulated plan, LLC members may be forced to have their entity dissolved through judicial action. 

continue reading

Keeping the “Limited” in Limited Liability Companies:  Promoter’s Contracts and Torts

Organizing a limited liability company (LLC) often requires more than simply preparing and filing articles of organization. Like any other corporate entity, an LLC frequently has to prepare itself to conduct business even before the LLC is formally organized. Enter the promoters - individuals who act on behalf of an LLC prior to its formal organization and conduct necessary pre-organization work, which generally includes entering into various contracts. Until recently, South Carolina courts had not directly addressed the issue of whether an LLC may be held liable for the actions of a promoter taken prior to the organization of the LLC.

continue reading