Focuses on Corporate Operating Agreements.
Discussion Background: Ron Cardigan, the 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. While Ron contributes 40% of the capital, Camille and Candie each contribute 30% of the remaining capital.
Because it was Ron's idea (and because Ron's contribution was greater than each of the others), Ron assumes he will receive more of the profits than Camille and Candie. On the other hand, 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.
Discussion Questions: Please fully address the following:
1. What law will the court apply?
2. In most states, how will a court resolve the dispute?
3. How could this dispute have been avoided in the first place? Assess fully.
Justify your answer using information from your textbook Reading and be sure to:
1. Assess the laws that govern the limited liability companies (the Uniform Limited Liability Company Act or "ULLCA").
2. Evaluate how these laws frame our scenario and how a court would rule.
3. Conclude how Ron, Camille, and Candie could have avoided the dispute by creating an operating agreement and integrating operating procedures into a written agreement.