Q: Can you discuss a Single Member LLC?
A: A Single Member Limited Liability Company has a single owner who has full control over the LLC. The LLC is a legal entity created by the state after the chartering process is completed and, as such, allows the single owner to avoid any liability for the entity's obligations unless that member guarantees that obligation. A Single Member LLC does not file federal tax returns in its own name. Rather, the Single Member reports the entity's taxable revenue as personal income on his or her Form 1040. Further, a husband and wife, if filing a joint return, may be considered a Single Member LLC.
In all other respects the single member LLC and a multi-member LLC are the same.
Q: Even with a personal guarantee, can a lender legally go after a personal guarantor's personal assets, e.g., liquidity in a bank, to cover the guarantor’s financial responsibility for a guaranteed loan?
A: Yes. Unless restricted in some way, a lender can pursue all of a guarantor’s personal assets to complete payment of a guaranteed loan.
Looking further, restrictions on this privilege may have been negotiated in originating the loan, so it depends on the precise language of the personal guarantee provided by the guarantor. As an example, the guarantee could include carve-outs that would prevent the lender from pursuing specific personal assets in seeking payment. In contrast, an unlimited guarantee is structured to allow the lender to pursue all guarantor personal assets. In the case of an unlimited guarantee, cash in a bank account or bank CDs would be subjected to attachment.
Course overview: The Credit Write-Up and the CRE Analytical Process