I opened a salon in June of 2003 as a sole prop.  My initial
investment was about $30000.00. In December of 2003, I decided to
expand my business and I took a business partner.  She gave me
$25000.00 as an investment and we set up an LLC with us being equal
partners.  Now here at the close of 2005, she is wanting to pull out
of the partnership.  The business has lost money and is now about
$28000.00 in debt. This is on 3 credit cards.
I am able to make a living because as an owner, I am also a hair
stylist.  She however is not.  She was handling the paper work etc.,
and the business isn't able to pay a salary for that.  So what she is
wanting is for me to continue to pay the debt under a credit
consolidation agreement that would have it paid off in approx 30
monthly payments of $575.00.  The total of the payments would be
$17250.00.
So these are my questions:
1.  What paperwork would be necessary to do this?  In effect, buying
her out of the LLC, a promissory note explaining the payments and that
these payments are to satiisy the debt of the business.
2.  Can the business still be considered a LLC since I will no longer
have a partner?  What if I wanted to make my husband the partner?  Or
would i be better off as a sole prop. again?  And what would the
process be to do so?
3.  Will my partner have a capital gain or loss?  Will I?
I don't know if I have enough information here for this question to be
answered effectively.