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 form a limited liability company 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.Urgency
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The court will determine whether Ron, Camille and Candie are member-managed LLC or a manager-managed LLC. This is crucial for the court to determine because “most LLC statutes and ULLCA provides that unless the articles of organization specify otherwise, an LLC is assumed to be member managed”(Miller, 2013). If Ron, Camille and Candie are member-managed LLC, the decision making process requires majority vote. The member-managed LLC is the appropriate for this kind of partnership. Since the three had no agreement on how to share the profit. This means that the court will apply LLC laws that govern how a partnership business is managed including sharing of profit.
In the case of Uniform Limited Liability company Act, the court may not apply it because less than one fifth adopted the Act. Therefore………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………….
Reference
Miller, R. L. (2013). Cengage Advantage Books: Fundamentals of Business Law: Summarized Cases, 9th Edition. Cengage.