Google Answers Logo
View Question
Q: Retiring from a partnership and lease obligations - California ( Answered,   1 Comment )
Subject: Retiring from a partnership and lease obligations - California
Category: Business and Money > Small Businesses
Asked by: dreemer-ga
List Price: $20.00
Posted: 13 Dec 2005 23:06 PST
Expires: 12 Jan 2006 23:06 PST
Question ID: 605612
I am retiring from my partnership in a 2-member LCC.  My partner and I
were not getting along and he refuses to dissolve or leave the LCC. 
Since he is taking over the company, I feel he is fully responsible
for the office lease which expires in two years.  He insists that I am
still responsible for paying half the rent because we are both
personal guarantors on the lease.  If he doesn't pay the full rent,
and the landlord goes after me, is it likely that an arbitrator would
rule in my favor and force my partner to pay?

We are using a generic partnership agreement that we got from
Subject: Re: Retiring from a partnership and lease obligations - California
Answered By: hagan-ga on 14 Dec 2005 12:53 PST
Hello, dreemer.  You're really asking several questions here -- what
is your obligation to the LESSOR; what is your obligation to the LLC;
and what are the LLC partners' obligations TO EACH OTHER.  For
clarity's sake I'm going to discuss them separately.

Also, at the outset, I will assume that the personal guarantee on the
lease is expressly described as irrevocable.  Otherwise, the general
rule in California is that a continuing guarantee may be revoked at
any time.  (Civil Code Section 2815; see also _Central Bldg. LLC. v.
Cooper_ (2005) 127 Cal.App.4th 1053.)  Usually a guarantee clause in a
commercial lease does indeed state that it is irrevocable, so I would
be VERY surprised if this one did not so state.

Okay.  The first part is going to be bad news:  you're on the hook TO
THE LESSOR whether your former partner continues the business or not. 
In other words, if the rent doesn't get paid for WHATEVER reason, the
landlord has every right to look right at you for payment.  You can
protest that you're no longer involved in the business, and it won't
matter.  You are liable because of that personal guarantee.  See
_Central Bldg. LLC. v. Cooper_ (2005) 127 Cal.App.4th 1053.

However, that does not mean you have to stand there alone.  Let's
assume the worst, and assume that your former partner flat refuses to
pay the entire rent.  That means that either you have to pony up the
difference in order to keep the landlord from suing you on the
guarantee, or you just wait until he does sue you.  Either way, THE
LLC ITSELF is liable TO YOU for what you paid.

Once you're out of the business, your obligation on the personal
guarantee is just like a co-signer on a note.  You're agreeing to
answer for the debt if it doesn't get paid, but really, the debt
"belongs" to the primary debtor.  In the unhappy event that you are
forced to pay that debt for the other "person," then you have the
right to look to that "person" for payment.  See _Quality Wash Group
V, Ltd. v. Hallak_ (1996) 50 Cal.App.4th 1687; _Flojo Internat., Inc.
v. Lassleben_ (1992) 4 Cal.App.4th 713.

Here, the primary debtor is the LLC itself -- NOT your former partner.
 Your former partner is in essentially the same position you are in
with respect to the lease.  He is a guarantor, but not the lessee. 
The fact that he is the "owner" of the business is irrelevant:  under
an LLC, you can't get to the assets of the owners unless you can prove
that the LLC is the "alter ego" of the owner, and that there is no
real separation between the interest and finances of the owner and the
interests and finances of the LLC.  (For a discussion of this aspect
of an LLC, you might want to look at

So your answer to your former partner is, "Wait a minute.  I don't
have to pay the rent -- and YOU don't have to pay the rent.  THE LLC
HAS TO PAY THE RENT, since it's the lessee.  We only have to pay if
the LLC defaults.  And if that happens, I'll be looking to the LLC's
assets for reimbursement, since this is a debt of the company, not my

Hope this helps.  If I can be of any further assistance, please don't
hesitate to ask. Thanks for the question.
Subject: Re: Retiring from a partnership and lease obligations - California
From: myoarin-ga on 14 Dec 2005 08:21 PST
I hope someone with more "hands-on" experience can advise you.  In the
meantime, you might look at the law on the subject, the Cal Corporate
Code.  Scroll down about 3/4 to 2.5 LLC, nos. 17000 and following:

Important Disclaimer: Answers and comments provided on Google Answers are general information, and are not intended to substitute for informed professional medical, psychiatric, psychological, tax, legal, investment, accounting, or other professional advice. Google does not endorse, and expressly disclaims liability for any product, manufacturer, distributor, service or service provider mentioned or any opinion expressed in answers or comments. Please read carefully the Google Answers Terms of Service.

If you feel that you have found inappropriate content, please let us know by emailing us at with the question ID listed above. Thank you.
Search Google Answers for
Google Answers  

Google Home - Answers FAQ - Terms of Service - Privacy Policy