Topic 1 Corporate Operating Agreements Ron Cardigan son of C

Topic 1: Corporate Operating Agreements

Ron Cardigan, son of Camille and Ray (Camille’s first husband) has met with Camille and Candie to form a limited liability company designed to be a place where young future clothing designers can work as part of an internship before entering fashion design school. Ron contributes 40% of the capital, and Camille and Candie each contribute 30%. Because it was Ron’s idea, he assumes he will receive more of the profits than Camille and Candie. Further, his contribution was greater than each of theirs. Camille and Candie feel they should all split the profits equally, as everyone has a unique talent that is being brought forth to run the new business. A dispute over the profits arises, and ultimately a court has to decide the issue.

Determine the following:

What law will the court apply?

In most states, what will result?

How could this dispute have been avoided in the first place? Assess fully.

Justify your answer using information from your Reading and be sure to:

Assess the laws that govern the limited liability companies [Uniform Limited Liability Company Act (ULLCA)].

Evaluate how these laws frame our scenario and how a court would rule.

Conclude how Ron, Camille, and Candie could have avoided the dispute by creating an operating agreement and integrating operating procedures into a written agreement.

Please write a summary answering each question.

Solution

According to Sec. 34-152.The profits and losses of a limited liability company shall be allocated among the members, and among classes of members, in the manner agreed to in the operating agreement. To the extent the operating agreement does not so provide, profits and losses shall be allocated on the basis of the value of the contributions made by each member to the extent they have been received by the limited liability company and have not been returned. To the extent the operating agreement of a member-managed limited liability company expressly relieves a member of the authority and responsibility to consent to distributions and imposes that authority and responsibility on one or more other members, the liability stated in subsection applies to the other members and not the member that the operating agreement relieves of authority and responsibility. Under Section 106(b), ] person that becomes a member of a limited liability company is deemed to assent to the operating agreement.” And by signing the operating agreement integrating operating procedures into a written agreement. This dispute could have been avoided.