Business Law I -- Cengage -- Chapter 20 -- Limited Liability Companies

Abara and nine others are (1) ______ of Cotillard, LLC. Generally, members' liability in the company would be limited to their respective (2) ________

1. members 2. investments in the company

Members of a limited liability company (3) ________ have the right to withdraw from the entity. Withdrawal from a limited liability company is also known as (4) _________. When a member dissociates from an LLC, he or she (5) ________ the right to participate in management decisions. Generally, a dissociated member (6) _________ possess the right to have his or her interest in the LLC bought out by the other members.

3. do 4. dissociation 5. loses 6. does

Cotillard's operating agreement (7) ______ contain provisions establishing a buyout price. In states that (8) ________ adopted the ULLCA, the LLC must purchase the interest at fair value within (9) _______ days after the dissociation. Therefore, Abara is entitled to receive (10) _________ on dissociation from Cotillard, LLC. The amount Abara is entitled to receive represents (11) ________

7. does not 8. have 9. 120 10. $1,000,000 11. the fair value of her interest in the LLC

Tala operates Sunshine Event Planning as a sole proprietorship. Lately, Tala has become dissatisfied with her employee, Leon. Leon continually refuses to follow directions, calls in late to work, and generally is not performing up to Tala's standards. Before Tala can fire Leon, she must obtain approval from:

no one

A member's duty of loyalty generally (12) _____ when a member dissociates from an LLC. The operating agreement is (13) _______ on whether Abara can form another company after dissociation. Therefore, Abara (14) _________ form her new business and has withdrawn from the LLC (15) _________

12. terminates 13. silent 14. may 15. rightfully

Abara (16) _________ receive her share of the fair value of the company in this instance because when specific terms are stated in the operating agreement they (17) _______ apply instead of default rules about how a dissociating members interest is purchased.

16. would not 17. do generally

Jasper, Saul, and Kenyon plan to open a new business providing sky-diving lessons and selling sky-diving equipment. Each of them plans to contribute the same amount of money to get the business started, and each will work for the business. Jasper is concerned about the possibility of being liable for the acts of Saul and Kenyon. Jasper also wants to make sure he does not pay more taxes than required. After reviewing the types of business entities available, Jasper suggests to Saul and Kenyon that they organize their new business as a(n):

LLC.

Johnson lives near Dollywood, a popular theme park in Tennessee. Johnson decides to begin a new money-making venture selling screen printed t-shirts from a booth just down the road from the theme park, to take advantage of the traffic that flows by on its way to the park. Johnson's t-shirts, however, will not be Dollywood-themed t-shirts; they will be Johnson's own creations. Johnson's daughter Susan helps him in his new venture by manning the booth from time to time, but Johnson has total control over everything about the business—from ordering the t-shirts, paying the bills, pricing the t-shirts, paying the taxes on his sales, and receiving all the profits from the venture. Even though Johnson put no thought into what kind of business venture he was creating when he started his business, Johnson has effectively created a:

sole proprietorship.

Bart, Sam, and Greg create Big Barns Sales LLC, a company that builds pre-constructed barns. They file the certificate of organization with the secretary of state and create an operating agreement for the LLC. The operating agreement, however, does not address the method by which the LLC will be managed. Because management of the LLC is not addressed in the operating agreement, it is assumed the LLC will be:

member-managed; all members will vote on decisions of the LLC, and the majority vote controls.