Discussion Unit 8 Business law and Microeconomics

Corporate Operating Agreements

Limited Liability Companies. John, Lesa, and Trevor form a limited liability company. John contributes 60% of the capital, and Lesa and Trevor each contribute 20%. Nothing is decided about how profits will be divided. John assumes that he will be entitled to 60% of the profits, in accordance with his contribution. Lesa and Trevor, however, assume that the profits will be divided equally. A dispute over the profits arises, and ultimately a court has to decide the issue. 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 John, Lesa, and Trevor could have avoided the dispute by creating an operating agreement and integrating operating procedures into a written agreement.