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Seller V. LLC: Case Study

522 Words3 Pages

When a seller makes persuasive arguments to a seller that entice them to make a purchase of land which includes material misrepresentations so that the price exceeds the fair market value of the land, and the Seller forms an LLC after the material misrepresentations were made then the Seller is unable to claim that his status as an LLC member protections him from liability to the buyer. Since the facts show that the LLC was formed after the misrepresentation occurred, the sellers cannot have been acting under as members of the LLC when the acts where committed, and therefore cannot be protected under the LLC umbrella. Hence, each member of the LLC is liable, joint and severable, and had constructive knowledge of the fraud, for the debts of the LLC and the fraud committed. Handy is not exempt because members may be liable for any claims that do not arise solely by reason of being a member or acting as a manager of an LLC. …show more content…

On April 21st, the sellers had already learned that the property was protected wetlands, making the statement “Excellent Development Potential” complete misrepresentation to any potential buyers. In this situation, the Sellers would be liable as the fraud was committed prior to the formation of the LLC, and are not shielded by the protection of the LLC. In reality since the LLC was not yet formed, there was not an entity to be acting on behalf of when the “Excellent Development Potential” comment was made. One could promise that an entity would be formed, and never be formed, there is no difference if there an entity was Handy was acting on behalf of an entity that did not exist or one that was to be

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