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Maverick, Attorney
Category: Business Law
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Experience:  20 years of professional experience
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Bill,Lester,and john formed a limited liability company. John

Resolved Question:

Bill,Lester,and john formed a limited liability company. John contribute 50% of the capital and Lester and Bill each contribute 25%. A dispute over the profits arises. a court has to decide the issue,. what law will the court apply? How could this dispute have been avoided in the first place
Submitted: 7 years ago.
Category: Business Law
Expert:  Maverick replied 7 years ago.

The best way to avoid these types of problems is to cover them in an operating agreement from the get go. There are a host of issues one must cover in the LLC operating agreement, some of which will depend on the type of business being run. Most operating agreements include the following:

  • the members' percentage interests in the LLC
  • the members' rights and responsibilities
  • the members' voting powers
  • how profits and losses will be allocated
  • how the LLC will be managed
  • rules for holding meetings and taking votes, and
  • buyout, or buy-sell, provisions, which establish a framework for what happens when a member wants to sell his or her interest, dies, or becomes disabled.

Most likely the court will allocate profit/loss according to ownership percentages unless the LLC operating agreement states otherwise.



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