The Dissolution Agreement

Truly, all one needs to do to dissolve an LLC is fill out a form with the state of your choice--or choices in my case--pay the extortion money they charge and mail the darn thing in. It really is that simple. And, as managing partner, I have the luxury of doing such things.

Though that may be simple on the surface, there really is more to this. For one thing, and this is pretty major, there are assets to split. For another, to dissolve an LLC (and fill out the above forms) without consent of the partners causes hurt feelings and ugly lawsuits, both of which I prefer to avoid.

So, with a pat on the back from Diamond Jim, I sat down last week and wrote out a Dissolution Agreement. The agreement discussed in length who got which homes. It discussed who paid what outstanding bills. It talked about what I as (now former) managing partner was responsible to do from this point forward. The agreement was two pages long. However, there was an enormous Appendix A I also created, which had all sorts of numbers on it that were relevant to Diamond Jim, the IRS and others who may wish to see it. When I sent the Dissolution Agreement to the Arizona Attorney (you know, she simply must get a nick-name), she called me and said, "I see you write contracts for a living." High praise! She only added one clause--one I purposely omitted and hoped not to have to include.

The first part of the agreement was simple. We divided up the homes according to who held the mortgage. In all fairness, Marty and I had the better homes. We had the homes with more equity. We had the homes in better shape. It wasn't planned that Marty and I would take out loans on the better homes, it just worked out that way. That said, Mr. Partner has the better tenants. All of his tenants but one have been there homes more than six years. The one tenant who is relatively new, isn't going anywhere any time soon. Those folks have been there for about two years. The way it stands now, we owe Mr. Partner money for our equity. We had spelled this out. He acknowledged, but that didn't stop the questions about why some homes had positive equity positions and some had negative ones.

When it came to the money end of the agreement, Mr. Partner was most interested. When I made a list of outstanding bills, I simply looked at which bill went with which home. For example, Mr. Partner is now the proud owner of the home in Leeds. He can pay any bill associated with that home. Marty and I are now the not-so-proud owners of the home in Moody. Anything related to that home is on us. Additionally, Marty and I offered to pay any legal fees associated with closing this down. Our end of the accounts payable was higher. However, this is where Mr. Partner began to get confused and slightly belligerent.

First Mr. Partner was under some insane impression I was ordering/insisting/demanding he write a check to cover all of the bills. I don't know why he thought this. I sent him several e-mails all saying things along the lines of, "As we agreed when we met last Sunday and last Thursday, the bills in black will be yours, and the ones in red will be the Sunshine's." In fact, I sat down with him twice and went over the six items he was expected to pay. Some time last week he even called me, suggesting I added extra bills to his list while he was sleeping.

"Who is Bliz Bookkeeping?" He asked, as if I covertly snuck this mysterious invoice into the mix.

"That would be our bookkeeper. The same one we have had for more than ten years and the same one you had lunch with last Friday," I replied.

"Ok then, carry on." Click.

Though this may seem to satisfy the common mortal's curiosity, this particular question of why we were asking him to pay all the bills came up several times.

Additionally, Mr. Partner decided he could not comprehend the bill payer system to his new bank account. Though I had set up the bills for him, he wanted to log on and do it himself. And, it had to be done right then and there. First he didn't have the password. So, I resent him the e-mail where I covered this. Then he didn't like something else. And finally, he didn't have the invoices to pay said bills. When I reminded him I handed him the insurance for Mrs. Sherwood's home at the lunch with him and Bliz, he argued I never did such thing. Finally, to give Mr. Partner the win, I offered to call our insurance agent have them re-send the policy. It was only then did he miraculously pull the invoice out of the dark, damp place I assume he had crammed it in earlier.

By Monday afternoon, I was done. I was finished with the insane questions. I was tired of the outright implications that we were somehow trying to pull the wool over his eyes. I was complete. I expected he would review the Agreement and get it back to me in the morning. Meanwhile, I had fantasies about this being out of my life by July 1. I saw stars aligning. I saw freedom. I could see the finish line. All I needed were two signatures.

Tuesday Mr. Partner contacted me about 30 times with banking questions. With invoice questions. With rental questions. Most were legitimate, however most were also repeats from Monday. At one point he actually told me the bill payer system was too complicated. However, he uses this same system to pay his home bills. I believe the bruise on my forehead is from where my palm of my right hand slammed into it a few too many times that day.

Then--and this was what put me over the edge--at one point, he wanted me to make up a spreadsheet for him, which included odd items, such as the mortgage balances and rental amounts. Though that may sound perfectly reasonable, all of this information is provided for him on a different spreadsheet he has. And, if that wasn't enough it was also in the big Appendix A that was attached to the Dissolution Agreement. But no, this new spreadsheet needed to be formatted with a certain font and using particular colors to show the migration patterns of the spotted waxwing. I obliged and only stuck in his properties. After all, he wasn't getting mine, so why would it matter. And frankly, I thought that's all he wanted.

Nope, that wasn't good enough. he wanted the homes Marty and I were taking too. Instead of arguing the needlessness of this futile exercise (they wouldn't be his in two days and this information was everywhere else), I just added the info. Then, when I thought all of this was resolved, he threw another curve ball. The home that went to foreclosure last year and WE NO LONGER OWN, well he wanted that loan information and equity value too.

At this point, I was grumbling curses that would make a drunken sailor blush. I started to remind him this is no longer our property so this was pointless, but stopped. You know what? If putting a bunch of gobbledygook on an Excel spreadsheet would get him to sign the damn Agreement, I could do three minutes of work. By the way, there are no loans for this company any more, but don't tell Mr. Partner. I provided, "loan numbers."

Wednesday morning, crazed with stress over the fact he had such a significant case of selective amnesia from the past several days, I took action. I filled out the Arizona Secretary of State's form, got a cashier's check and mailed it in. It was done. Woot. However, though the LLC was now legally dissolved, Mr. Partner still had not given me back a signed Dissolution Agreement. So, legal or not, it wasn't really finished.

By Wednesday night, I had sent him an e-mail, reminding him not to pay any of his mortgages until we severed. Because that might look "funny" to the IRS. And all of this passive-aggressive crap over the past few days was reinforcing why I so much wanted to be done with this LLC.

I finally did get the signed Dissolution Agreement. It is now in my safe. I also sent a copy (signed by all parties) back to Mr. and Mrs. Partner and the Arizona Attorney. Though I would like to tell you this is over, it isn't. There is still the transition plan.