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Communication 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 hut 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. If you were providing Lindsey Wilson counsel, what might you suggest in forming the final agreement?

BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094
BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

Solutions

Chapter
Section
Chapter 12, Problem 12.3CP
Textbook Problem

Communication

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 hut 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.

If you were providing Lindsey Wilson counsel, what might you suggest in forming the final agreement?

Expert Solution
To determine

To Suggest: the final agreement for L.W.

Explanation of Solution

From: XYZ

To: L W Counsel

Dt: 9th February, 2018

Sub: Suggestion in the formation of final agreement.

The operating agreement in a LLC plays a vital role in setting up of a business. Here Mr. LW is funding the business where other two members contribute their effort and expertise. In this type of arrangement often conflicts arises as the interest of the investor differs from the interests of the members who operates the LLC.

So following are the suggestions to LW Counsel for forming the final agreement.

(1) All matters should not be settled by majority of votes, as there is a chance that two non-investing members’ vote may block interest of LW...

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Chapter 12 Solutions

Accounting
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