Question
Lindsey Wilson has agreed to invest $200,000 into an LLC with Lacy Lovett and Justin Lassiter. Lovett and Lassiter will not invest any money but
Lindsey Wilson has agreed to invest $200,000 into an LLC with Lacy Lovett and Justin Lassiter. Lovett and Lassiter will not invest any money but will provide effort and expertise to the LLC. Lovett and Lassiter have agreed that the net income of the LLC should be divided so that Wilson is to receive a 10% preferred return on her capital investment prior to any remaining income being divided equally among the partners. In addition, Lovett and Lassiter have suggested that the operating agreement be written so that all matters are settled by majority vote, with each partner having a one-third voting interest in the LLC.
1. If you were providing Lindsey Wilson counsel, what might you suggest in forming the final agreement?
Terry Willard and Jasmine Hill decide to form a partnership. Willard will contribute $300,000 to the partnership, while Hill will contribute only $30,000. However, Hill will be responsible for running the day-to-day operations of the partnership, which are anticipated to require about 45 hours per week. In contrast, Willard will only work five hours per week for the partnership. The two partners are attempting to determine a formula for dividing the partnership's net income. Willard believes the partners should divide income in the ratio of 7:3, favoring Willard, since Willard provides the majority of the capital. Hill believes the income should be divided by 7:3, favoring Hill, since Hill provides the majority of effort in running the partnership business.
2. How would you advise the partners in developing a method for dividing income?
(Please answer clearly and in your words.)
Answer each of the following questions in about 250-300 words-
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started