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Post your answers to questions 18-3, 19-7, 20-3, 21-6 at the end of each chapter in the text. Ē Randy textbook.pdf Х tv - Х v file:///C:/Users/seetha%20mahalaxmi/Desktop/Randy%20textbook.pdf ili a ... CASE 18.3 Venture Sales, LLC v. Perkins Supreme Court of Mississippi, 86 So.3d 910 (2012). BUNLOP mer TANSSI BACKGROUND AND FACTS Walter Perkins, Gary Fordham, and David Thompson formed Venture Sales, LLC, to develop a subdivision in Petal, Mississippi. All three members contributed land and funds to Venture Sales, resulting in total holdings of 466 acres of land and about $158,000 in cash. Perkins was an assistant coach for the Cleveland Browns, so he trusted Fordham and Thompson to develop the property. Over a decade later, however, Fordham and Thompson still had not done anything with the property, although they had developed at least two other subdivisions in the area. Fordham and Thompson said that they did not know when they could develop the property and that they had been unable to get the additional $8 million they needed to proceed. Fordham and Thompson suggested selling the property, but Perkins did not agree with the proposed listing price of $3.5 million. Perkins then sought a judicial dissolution of Venture Sales in Mississippi state court. The trial court ordered the company dissolved. Fordham, Thompson, and Venture Sales appealed. IN THE LANGUAGE OF THE COURT WALLER, Chief Justice, for the Court. **** *** [Under the Mississippi Code, an LLC may be dissolved if it is not reasonably practicable to carry on the business in conformity with the certificate of formation or the limited liability com- pany agreement *** While no definitive, widely accepted test or standard exists for determining "reasonable practicability," it is clear that when a limited liability company is not meeting the economic purpose for which it was established, dissolution is appropriate. In making this determination, we must first look to the company's operating agreement to determine the purpose for which the company was formed. (Emphasis added.] Venture Sales' operating agreement states that the company's purpose is "to initially acquire, develop and sale (sic) commercial and residential properties near Petal, Forrest County, Mississippi." At trial, Fordham admitted that the company was formed for the purpose of acquiring and developing property. Yet, more than ten years after Venture Sales was formed with Perkins as a member, the property remains completely undeveloped. Fordham and Thompson have offered a number of reasons why development has been delayed to this point. [Emphasis in original.] Despite [the] alleged hindrances, Fordham and Thompson have, during this ten-year period, successfully formed two other LLCs and have developed at least two other subdivisions with around 200 houses, collectively, within twenty-five miles of the subject property. More impor- tantly, though, Fordham and Thompson presented no evidence that Venture Sales would be able to develop the land as intended within the foreseeable future. When asked by the trial court when Venture Sales might be able to begin developing as it had planned, Fordham could not say. Fordham and Thompson admitted that it would take around $8 lion to "kick off" construction of the subdivision as planned, and the [trial court found that Venture Sales was currently unable to get additional bank loans or other funding needed to begin development. **** Fordham and Thompson claim that Perkins has blocked Venture Sales from taking advantage of certain "business opportunities," such as selling the property at a reduced price of $3.5 mil- lion ***. However, these "business opportunities" were merely ideas from Fordham about how to make use of the property. *** As discussed above, they presented no evidence that Venture Sales could develop the property, which is the purpose for which the company was formed. CASE 18.3 CONTINUES Ē Randy textbook.pdf Х t v - Х v file:///C:/Users/seetha%20mahalaxmi/Desktop/Randy%20textbook.pdf ili a ... 424 UNIT FOUR The Business Environment CASE 18.3 CONTINUED DECISION AND REMEDY The Mississippi Supreme Court held that Venture Sales could be judicially dissolved. It therefore affirmed the decision of the trial court THE LEGAL ENVIRONMENT DIMENSION Would dissolution be appropriate if the parties had formed a partnership rather than an LLC? Explain your answer. MANAGERIAL IMPLICATIONS To avoid the type of dispute in which the members of Venture Sales became embroiled, the managers of an LLC or other business organization should take care to act on the firm's economic purpose" within a reasonable time. To ensure that they will be able to do so, the manag- ers should draw up plans and determine the full cost of the project. They should also ascertain how the needed funds will be obtained. Ifbank loans or other funding will not be available, as occurred in this case, the LLC should require a higher level of contributions from its members to ensure that there will be sufficient funds to complete the project successfully. tional accountancy and professional services firms, are organized as LLPs, including Ernst & Young, LLP, and PricewaterhouseCoopers, LLP. Winding Up When an LLC is dissolved, any members who did not wrongfully dissociate may participate in the winding up process. To wind up the business, members must collect, liquidate, and distribute the LLC's assets. Members may preserve the assets for a reasonable time to optimize their return, and they continue to have the authority to perform reasonable acts in con- junction with winding up. In other words, the LLC will be bound by the reasonable acts of its members during the winding up process. Once all of the LLC's assets have been sold, the pro- ceeds are distributed to pay off debts to creditors first (including debts owed to members who are creditors of the LLC). The members' capital contributions are returned next, and any remaining amounts are then distributed to members in equal shares or according to their operating agreement. Formation of an LLP LLPs must be formed in compliance with state stat- utes, which may include provisions of the Uniform Partnership Act (UPA). The appropriate form must be filed with a central state agency, usually the secretary of state's office, and the business's name must include either "Limited Liability Partnership" or "LLP" [UPA 1001, 1002]. An LLP must file an annual report with the state to remain qualified as an LLP in that state LUPA 1003) In most states, it is relatively easy to convert a tra- ditional partnership into an LLP because the firm's basic organizational structure remains the same. Additionally, all of the statutory and common law rules governing partnerships still apply (apart from those modified by the LLP statute). Normally, LLP Statutes are simply amendments to a state's already existing partnership law. SECTION 4 LIMITED LIABILITY PARTNERSHIPS The limited liability partnership (LLP) is a hybrid form of business designed mostly for profes- sionals who normally do business as partners in a partnership. Almost all of the states have enacted LLP statutes. The major advantage of the LLP is that it allows a partnership to continue as a pass-through entity for tax purposes but limits the personal liability of the nartners The LP is especially attractive for profes. Liability in an LLP An LLP allows professionals, such as attorneys and accountants, to avoid personal liability for the mal- practice of other partners. A partner in an LLP is still liable for her or his own wrongful acts, such as negligence, however. Also liable is the partner who supervised the individual who committed a wrongful act. (This generally is true for all types of partners and partnerships, not just LLP.) Example 18.6 five lawvers onerate a law firm as Ē Randy textbook.pdf Х t v - Х v file:///C:/Users/seetha%20mahalaxmi/Desktop/Randy%20textbook.pdf = 2 A ... 2011 WL 340094 (1ex.App-sun ArL 2011)) (see page 454.) . For a sample answer to Problem 19-6, go to Appendix F at the end of this text. 19-7. Piercing the Corporate Veil. In 1997, Leon Greenblatt, Andrew Jahelka, and Richard Nichols incorporated Loop Corp. with only $1,000 of capital. Three years later, Banco Panamericano, Inc., which was run entirely by Greenblatt and owned by a Greenblatt family trust, extended a large line of credit to Loop. Loop's subsidiaries then participated in the credit, giving $3 million to Loop while acquir- ing a security interest in Loop itself. Loop then opened an account with Wachovia Securities, LLC, to buy stock shares using credit provided by Wachovia. When the stock values plummeted, Loop owed Wachovia $1.89 million. Loop also defaulted on its loan from Banco, but Banco agreed to lend Loop millions of dollars more. Rather than repay Wachovia with the influx of funds, Loop gave the funds to closely related entities and "compensated" Nichols and Jahelka without issuing any W-2 forms (forms reporting compensation to the Internal Revenue Service). The evidence also showed that Loop made loans to other related entities and shared office space, equipment, and telephone and fax numbers with related entities. Loop also moved employees among related entities, failed to file its tax returns on time (or sometimes at all), and failed to follow its own bylaws. In a lawsuit brought by Wachovia, can the court hold Greenblatt, Jahelka, and Nichols per- sonally liable by piercing the corporate veil? Why or why not? [Wachovia Securities, LLC v. Banco Panamericano, Inc., 674 F.3d 743 (9th Cir. 2012) (See page 441.) 19-8. Duty of Loyalty. Kids International Corp. produced children's wear for Wal-mart and other retailers. Gila Dweck was a kids director and its chief executive offi- cer. Because she felt that she was not paid enough for the company's success, she started Success Apparel to compete with Kids. Success operated out of Kids' prem- ises, used its employees, borrowed on its credit, took advantage of its business opportunities, and capital- ized on its customer relationships. As an "administra- tive fee," Dweck paid Kids 1 percent of Success's total Mike Lyons incorporated Lyons Concrete, Inc., in Montana, but did not file its first annual report, so the state involuntarily dissolved the firm in 1996. Unaware of the dissolution, Lyons continued to do business as Lyons Concrete. In 2003, he signed a written con- tract with William Weimar to form and pour a certain amount of concrete on Weimar's property in Lake County for $19,810. Weimar was in a rush to complete the entire project, and he and Lyons orally agreed to additional work on a time-and- materials basis. When scheduling conflicts arose, Weimar had his own employees set some of the forms, which proved defi- cient. Weimar also directed Lyons to pour concrete in the rain, which undercut its quality. In mid-project, Lyons submitted an invoice for $14,389, which Weimar paid. After the work was complete, Lyons sent Weimar an invoice for $25,731, but he refused to pay, claiming that the $14,389 covered everything. To recover the unpaid amount, Lyons filed a mechanic's lien as "Mike Lyons d/b/a Lyons Concrete, Inc." against Weimar's property. Weimar filed a suit in a Montana state court to strike the lien, and Lyons filed a counterclaim to reassert it. Weimar v. Lyons, 338 Mont. 242, 164 P.3d 922 (2007) (See page 439.) (a) Before the trial, Weimar asked for a change of venue on the ground that a sign on the courthouse lawn advertised "Lyons Concrete." How might the sign affect a trial on the parties' dispute? Should the court grant this request? Why or why not? (b) Weimar asked the court to dismiss the counter- claim on the ground that the state had dissolved Lyons Concrete in 1996. Lyons immediately filed new articles of incorporation for "Lyons Concrete, Inc." Under what doctrine might the court rule that Weimar could not deny the existence of Lyons Concrete? What ethical values underlie this doctrine? Should the court make this ruling? Explain. (c) At the trial, Weimar argued, in part, that there was no "fixed price" contract between the parties and that even if there were, the poor quality of the work, which required repairs, amounted to a breach, excus- ing Weimar's further performance. Should the court rule in Weimar's favor on this basis? Why or why not? Legal Reasoning Group Activity 19-10. Shareholders' Duties. Milena Weintraub and Larry Griffith were shareholders in Grand Casino, Inc., which operated a casino in South Dakota. Griffith owned 51 percent of the stock and Weintraub 49 percent. Weintraub managed the casino, which Griffith typically visited once a week. At the end of 2012, an account- ing audit showed that the cash on hand was less than the amount posted in the casino's books. Later, more Ē PD Randy textbook.pdf Х tv - Х v file:///C:/Users/seetha%20mahalaxmi/Desktop/Randy%20textbook.pdf ili a ... LITUSE CASE ANALYSIS Case 20.3 Auer v. Paliath Court of Appeals of Ohio, Second District, 2013-Ohio- 391,986 N.E.2d 1052 (2013). **** IN THE LANGUAGE real estate broker to do or to deal with OF THE COURT any acts or transactions set out or FROELICH, J. (Judge] comprehended by the definition of a real estate broker, for compensation Torri Auer ſa California resident] or otherwise." brought suit [in an Ohio state court) Under R.C. Section 4735.21, no against real estate salesperson Jamie real estate salesperson may collect Paliath, real estate broker Keller any money in connection with any Williams Home Town Realty, and real estate transaction, except as in others based on alleged fraud by the name of and with the consent of Paliath in the sale of several rental the licensed real estate broker under properties (in Dayton, Ohio) to Auer whom the salesperson is licensed. *** . After a jury trial ***, Paliath was found liable to Torri Auer in the *** A real estate broker will be held amount of $135,200 for fraud in the vicariously liable for intentional torts inducement of Auer's purchases of the committed by salesmen acting within the properties. *** The jury also awarded scope of their authority. Vicarious liabil- $135,200 to Auer from Home Town ity is appropriate because a real estate Realty, based on the broker's vicarious salesman has no independent status or liability for Paliath's actions in con- right to conclude a sale and can only nection with Auer's purchases of the function through the broker with whom properties. he is associated. A salesman is required Home Town Realty appeals from to be under the supervision of a licensed the trial court's judgment. broker in all of his activities related to real estate transactions. [Emphasis *** Under (Ohio Revised Code added.] (R.C.) Section 4735.01] the term "real estate broker" includes "any person, *** When a real estate salesper- partnership, association, limited son acts in the name of a real estate liability company, limited liability broker in connection with the type of partnership, or corporation *** who real estate transaction for which he or for another *** and who for a fee, she was hired and the broker collects commission, or other valuable consid- a commission for the transaction, the eration" engages in various activi- salesperson's actions in connection ties regarding real estate, including with that real estate transaction are selling, purchasing, leasing, renting, within the scope of the salesperson's listing, auctioning, buying, manag- employment, as a matter of law. ing, and advertising real estate. A real In this case, Paliath contracted estate salesperson generally means with Home Town Realty as a real "any person associated with a licensed estate salesperson to assist clients with the purchase and sale of real estate. Paliath advised and assisted Auer in the purchase of the *** properties, and her fraudulent conduct involved misrepresentations regarding those properties. Reviewing the properties sepa- rately, the evidence at trial established that Home Town Realty was listed as the real estate broker on the purchase contract, the agency disclosure state- ment, and the settlement statement for the Belton Street sale. Home Town Realty received a commission check of $180 from the title company that conducted the closing. Based on this evidence, it was established, as a mat- ter of law, that Paliath acted within the scope of her employment as a real estate salesperson with Home Town Realty in relation to Auer's purchase of the Belton property. Similarly, Paliath's actions with respect to the 1111-1115 Richmond Avenue properties were taken as a real estate salesperson assisting Auer with the purchase of the properties. Home Town was listed as a broker on the pur- chase contract, the agency disclosure statement, and the settlement state- ment for 1111 Richmond Avenue, and it received a commission of $2,400 fol- lowing the closing. *** The evidence thus demonstrated, as a matter of law, that Paliath was acting in the scope of her employment regarding the sale of 1111 Richmond Avenue. **** *** The trial court's judgment will be affirmed.
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DISCUSSIONS

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Would dissolution be appropriate if the parties had formed a partnership rather
than an LLC?
Dissolution of limited liability Partnership
Dissolution of the limited Liability Partnership is important because it has both general
and limited partners. General partners participate in the administration and have 100% liability
for partnership obligations while the limited partners can’t participate in the management and
have no obligations beyond their capital contributions protecting them against personal liability
for partnership debts and any other obligation (Cross & Miller, 2015). The limited partners,
however, receive a share of the profits. Limited companies are attractive to passive investors
since the assets are protected from confiscation in case of a personal lawsuit(Smith, P., & Young,
S.,2012).
Dissolution of a limited liability partnership may be caused by various factors such as the
death of a general partner, if it’s no longer carrying out business, court order and voluntary strike
off. When you compare the reasons leading to the dissolution of a partnership and those that
result in the dissolution of a limited liability partnership they are entirely different. One, when
any partner dies in a partnership, it leads to an automatic dissolution of the business, but for the
LLP, dissolution is done only when a general partner dies but not the partners with limited
liabilities.
Striking off the LLP’s name from the registe...


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