[WSBAPT] Delaware LLC

[Stuart Ainsley]

Working on a purchase of a property in another state.  As part of the deal the buyer is trying to assume an existing CMBS loan.  The client has formed a Washington LLC with a Washington LLC as the sole member.  Lender is insisting that with a single member LLC it must be a Delaware LLC so we can include the Delaware springing member provisions that will allow appointment of a new member in the event the existing single member goes into bankruptcy.  The want an opinion letter from a Delaware attorney that includes the following language:

Under the LLC Act and the LLC Agreement, the Bankruptcy or dissolution of the Member will not, by itself, cause the Company to be dissolved or its affairs to be wound up.

I am wondering if anyone has come up with a work around by which a Washington LLC can automatically appoint a new member to keep the borrowing entity alive in the event the single member goes into bankruptcy.  We need the borrowing entity to be a "disregarded entity" for tax purposes in order to complete a 1031 exchange.

Any thoughts?

Stuart

Stuart M. Ainsley
Attorney

GOURLEY LAW GROUP
THE EXCHANGE CONNECTION
SNOHOMISH ESCROW
P.O. Box 1091
Snohomish, WA 98291
PH:  (360) 568-5065
Fax: (360) 568-8092

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