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Tagged Posts: operating agreement’

Can an LLC Be Precluded from Exercising Its Right to Bankruptcy Relief?

October 11, 2016

To be sure, bankruptcy is not something that new and emerging businesses often think about.  But however unpleasant the thought might be, it may become necessary in the course of running a business to get a fresh start.  In the second quarter of 2016, for example, businesses with 1-4 employees constituted 38.39% of business bankruptcy filings, while businesses with 5-9 employees and business with 10-19 employees constituted 18.29% and 9.69%, respectively.[1]  While big businesses are not immune from the risks of bankruptcy, the numbers seem to suggest that the vast majority of bankruptcy petitions are filed by small businesses, making it all the more necessary for them to plan ahead.… Read the rest

Resolving Business Partnership Disputes, à la UFC

October 4, 2016

This author is not a big fan of fighting sports, but the news of the sale of the Ultimate Fighting Championship (“UFC”) in early July was hard to miss.  Nay, it wasn’t the eye-popping price tag ($4 billion) attached to the sale of the company to a group led by talent agency WME-IMG, which the media says is the largest deal in the history of professional sports,[1] but the way the former majority owners, Lorenzo and Frank Fertitta, agreed to settle disputes.… 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

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

June 30, 2016

In our previous blog on Meissner v. Yun, a New York case decided under Delaware law, we discussed the importance of a written LLC agreement (sometimes also referred to as member/operating/company agreement, depending on the jurisdiction) that spells out each member’s rights and obligations with specificity in the context of a break-up between two business partners.[1] In that case, the business partners did not have a signed operating agreement, which led to a dispute surrounding capital contributions and ownership.… Read the rest

Business Divorces: What Happens When Partners Separate

January 26, 2016

A Delaware Case: Meissner v. Yun. In our previous blog series on business divorce (available here), we focused on the break-up between two or more business owners due to disagreement or other circumstances, leading to a deadlock, forced sale of the business, or total dissolution. Oftentimes, disputes arise either because there is no written agreement, or if there is, it is poorly drafted, inadequately addressing keys terms like ownership, buy-out, and dispute resolution mechanisms. As we emphasized over and over, the importance of advance planning and carefully thought-out “business prenup” should not be underestimated.… Read the rest

Comparison of LLC Statutes

August 10, 2015

Other Considerations

So, now that you have done your research, you decide to form your LLC in Delaware and file the required forms in Delaware.  Is that all you need to do?  It depends on where you actually conduct business.  Most, if not all, states require foreign LLCs (i.e., LLCs formed under the laws of another jurisdiction) to register or apply for authority to do business in that state, if the LLC does business there.  What constitutes “doing business” in a particular state is often debatable, but having a principal place of business or regularly engaging in transactions would most likely count as such, subjecting the entity to the state’s foreign LLC filings, fees, and taxes.… Read the rest

Comparison of LLC Statutes

August 6, 2015

Court System: Who Will Hear My Case?

At times, even with careful planning and drafting, business relationships may turn sour and amicable resolution impossible.  This is where being a Delaware entity might prove to be decisively advantageous.  Delaware houses the nation’s oldest business court, the Delaware Court of Chancery established in 1792.[1]  As a court of equity, it has broad jurisdiction over disputes involving the internal affairs of Delaware business entities and has developed a respected body of case law interpreting Delaware business law.… Read the rest

Comparison of LLC Statutes

August 3, 2015

Series Availability: The Latest Option

Another interesting difference among LLC statutes is the availability of series LLC.  This relatively new concept is said to have its origin in offshore financial institutions as a way of allocating assets and risks among a series of companies.  Series LLC offers numerous advantages, which include flexible structure, greater protection against liability, and lower filing fee and administrative burdens, but is also fraught with uncertainty, particularly with respect to its treatment under federal bankruptcy law and the laws of states that do not recognize series LLCs. … 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.