Legal Question in Business Law in Wisconsin

Personal Guaranties

The following section appears in an LLC operating agreement. Need help interpreting liability.

The Members (MBR) acknowledge that certain of the Mbrs or their affiliates, parents, or family mbrs, may be called upon to personally guarantee obligations of the Company. The Mbrs may be called upon to personally guarantee loans from banks and other credit facilities for the Company. Notwithstanding that such personal guarantees to third party creditors may provide for joint and several liability of the persons executing the same, it is agreed as between the Mbrs, that each Mbr shall be responsible for his proportionate share of any Company liabilities which may be guaranteed by other Mbrs, or by himself, up to the amount of such liability or liabilities multiplied by his Percentage Equity Interest, as set forth in Schedule �A� attached hereto. To the extent a Mbr pays more than his Percentage Equity Interest as applied to such guaranteed liability, he shall have a right to indemnification from the other Mbrs for their respective shares of such guaranteed liability. This indemnification right shall include any attorneys� fees and costs incurred by a Mbr in enforcing this indemnification agreement as against any other Mbr or Mbrs.


Asked on 7/13/09, 3:11 pm

1 Answer from Attorneys
Thomas Schober Schober Schober & Mitchell, S.C.

Re: Personal Guaranties

This section appears to indicate that the parties agree to proportionate liability even though guarantees to third parties may have been joint and several. Proportionate liability means owing a proportionate share. So if there are two members, one a 75% owner and the other a 25% owner, then even though the third party could go after either of them for 100%, as between themselves, they agree that they would split the obligation 75/25%. An action between these parties is called an action for contribution.

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Answered on 7/13/09, 4:23 pm


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