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Partnership
The nature of the law governing limited liability corporation (LLC) allows owners to dictate the percentage of ownership in any fashion they deem appropriate (Internal Revenue Service). Because LLCs are a hybrid form of business operation that enjoys benefits of both a partnership and a corporation, Stratum and Brown can handle the capitalization of their business, the distribution of profits and losses, compensation for services, and the proportionate responsibilities in the operation of the business in any manner that they prefer. Although a written agreement documenting these various issues is not required, prudent management would dictate that this is done (Horvath). Stratum and Brown had the foresight to document their agreement but failed to clearly set forth how Brown's services would be valued and how they would be treated. Obviously, her services have value but unless the parties can agree as to how such services are to be treated, a potentially large problem exists. Absent a provision in the operating agreement to the contrary, Stratum and Brown are considered as equal members and share equal authority in the management of the company but he would lack the authority to appoint his son as a manager absent...
Brown's withdrawal presents some interesting problems. What effect it has on the operation of the business depends on the jurisdiction, its LLC statutory language, and the terms of the operating agreement relative to such situation. Depending on these factors the business may be able to continue operation or the business may have to be dissolved in accordance with traditional partnership laws (Miller). As to what Brown may be entitled to upon her withdrawal from the business, is dependent upon how her services have treated by the company's accountant. Such information is missing from the facts provided so a clear determination is not possible. Finally, absent a provision in the operating agreement prohibiting her from doing so Brown is free to purchase and compete against her old company.
2. Securities
CGC's involvement in the sale of Amenity places CGC in a very vulnerable and dangerous position. The sale of any form of securities exposes a business or individual to a wide range of scrutiny at both the state and federal level. Since the period immediately following the Great Depression, extensive statutory control has been placed over the entire field of securities. The majority of these…
References
Horvath, M.T. (2005). Entrepreneurs and the Choice of Limited Liability. Journal of Institutional and Theoretical Economics, 681-707.
Internal Revenue Service. (2011, June 21). Limited Liability Company. Retrieved September 12, 2011, from IRS.gov: http://www.irs.gov/businesses/small/article/0,,id=98277,00.html
Lowenfels, L.D. (1993). What is a Security under the Federal Securities Laws. Albany Law Review, 473-524.
Miller, S.K. (2001). What Buy-out Rights, Fiduciary Duties, and Dissolution Remedies Should Apply in the Case of the Minority Owner of a Limited Liability Company. Harvard Journal on Legislation, 413.
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