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Tagged Posts: limited liability company’

When Things Fall Apart: Business Partnership, Disagreement, and Dissolution (Part IV)

September 8, 2016

In Mizrahi v. Cohen,[1] a dentist and an optometrist formed a limited liability company for the purpose of the construction and operation of a mixed-use building in which they intended to set up their respective offices.  The two did not have an LLC agreement at the time they formed the LLC; it was executed a few months later when they purchased the land.  The lender required an LLC agreement and the attorney who represented both members at the closing drafted an LLC agreement. … Read the rest

When Things Fall Apart: Business Partnership, Disagreement, and Dissolution (Part III)

September 6, 2016

In Saunders v. Firtel, as in Cline v. Grelock, the two business partners were close friends.[1]  Firtel was the sole owner of a pharmaceutical sales corporation called Adco and Saunders was a sales representative for a medical supply company.  In 1986, the two decided to enter into a formal business relationship by allowing Saunders to obtain a 49% shareholder interest in Adco and to become an employee of the company.  Their written agreement provided that both would devote their time and efforts to the business and receive an equal combination of compensation and fringe benefits but also allowed Firtel to spend considerable time away and apart from the business. … Read the rest

When Things Fall Apart: Business Partnership, Disagreement, and Dissolution (Part I)

August 23, 2016

Here at The R. Shawn McBride Law Firm, PLLC, we write and speak frequently on business partnership, especially the 4 Ds (death, disability, divorce, and disagreement), which can have a major impact on businesses.  In our previous blog series on business divorce, for example, we talked about why business partners may disagree, describing some instances of conflict that business owners may encounter, and what they can do to protect themselves and the value of their business in the event of a business break-up and the attendant business disruption. … Read the rest

Charging Orders: Is a Creditor of an LLC Member Necessarily a Creditor of the LLC? (Part II)

July 26, 2016

Merrill Ranch Properties, LLC v. Austell[1] involved a bank loan to an LLC, secured by certain property in Arizona and guaranteed by an affiliated individual and eight trust entities he controlled.  At some point, the loan was declared in default and the bank filed a lawsuit in Arizona against the borrower and the guarantors to recover the balance of the loan.  The lawsuit eventually settled.  Subsequently, however, the plaintiff discovered that shortly after the loan was declared in default, three LLCs with corporate relationships to the guarantor transferred certain assets to various newly-created entities that were, in turn, directly or indirectly owned by trusts controlled by the guarantor.  … Read the rest

Covenant Not To Compete When Buying or Selling a Business (Part V)

July 21, 2016

Texas.

In Texas, as in many other states, a covenant not to compete is enforceable if: (i) it is ancillary to or part of an otherwise enforceable agreement at the time the agreement is made; (ii) it is reasonable as to time, geographic area, and scope of activity to be restrained; and (iii) the restraint imposed is no greater than is necessary to protect the goodwill or other business interests at issue.[1]  If the first two conditions are met but the restraint imposed is greater than necessary, Texas courts have the authority to reform the covenant to the extent necessary to make it reasonable as to time, geographic area, and scope of activity.… Read the rest

Charging Orders: Is a Creditor of an LLC Member Necessarily a Creditor of the LLC? (Part I)

July 19, 2016

In our previous blog series on Comparison of LLC Statutes, we briefly touched on the concept of LLC charging order.  In many states, including Delaware, New York, and Texas, a creditor with a judgment against an LLC member can apply for a charging order to satisfy the judgment.  That way, the creditor gets the right to receive distributions from the LLC to which the debtor/member would otherwise have been entitled.  A charging order may or may not be the exclusive remedy by which a creditor may satisfy a judgment out of the debtor’s LLC interest, depending on the jurisdiction, and this can make a big difference if the LLC does not make any distributions.… Read the rest

Covenant Not To Compete When Buying or Selling a Business (Part IV)

July 14, 2016

New York: Sale of Business and Good Will Beyond the Label.

In New York, non-competes used to be strongly disfavored by courts.[1]  Over time, however, courts came to recognize that there are situations in which it was not only desirable but essential to enforce non-competes.[2]  For example, in the context of a sale of a business along with its good will as a going concern, New York courts enforce a covenant not to compete because a seller of a business should not be allowed to recapture the good will of the very business he or she transferred for value by competing against the buyer.… Read the rest

Is My Company’s Lawyer Also My Lawyer? (Part II)

July 7, 2016

As the case progressed, Meissner and Yun, the two former business partners, entered the discovery phase.[1] Meissner sought the disclosure of some email threads between Yun and attorney Christopher Kelly. Yun claimed that they were protected by attorney-client privilege and refused to produce them.

As the court noted, for a party to assert this privilege, an attorney-client relationship must exist. And such a relationship exists when a party contacts the attorney in his or her capacity as an attorney for the purpose of obtaining legal advice or service.… Read the rest

All postings are intended to be planning tools to familiarize readers with some of the high-level issues discussed therein. No posting is intended to be a comprehensive discussion and additional details should be discussed with your transaction planners including attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. This article should not be treated as legal advice to any person or entity.