DEALING WITH “FLOATING INTERESTS” IN LLC OPERATING AGREEMENTS

The attached excellent new post by Peter Mahler, based on a very recent New York case, describes the very scary legal and  persons consequences that can arise when members of a multi-member LLC fail to define adequately in their operating agreement the circumstances in which the members’ rights to share in LLC profits will change because of changing circumstances.

https://www.nybusinessdivorce.com/2019/10/articles/operating-agreement/the-perils-of-indeterminate-llc-membership-interests/

 

WHEN DOES A BUSINESS BECOME AN ACTIVE TRADE OR BUSINESS FOR START-UP DEDUCTION PURPOSES?

The excellent post under the link below addresses an issue that can be important for many start-up LLCs—namely, the issue of when a business ceases to be a business in formation and becomes an active trade or business for start-up deduction purposes.  The issue was addressed and resolved in a recent Tax Court decision discussed in the post.

Here’s the link:

http://taxblog.dickinson-wright.com/2019/09/recent-case-sheds-light-on-when-a-trade-or-business-begins/

WHAT DOES THE TERM “DISREGARDED ENTITY” ACTUALLY MEAN?

Every LLC lawyer and accountant should have a thorough knowledge of how the Check-the-Box Regulations apply to LLCs and, in particular, about what the Check-the-Box Regulations term “disregarded entity” means—and doesn’t mean.  For a useful discussion about disregarded entities under current law, click on the link below:

https://www.sullivanlaw.com/assets/htmldocuments/JPTE_22-04_Hammell-Kupiec-Ponda.pdf

MEMBER DISCRETION VS. THE IMPLIED COVENANT

Under the link below is an excellent post about a recent decision of the Delaware Court of Chancery employing the implied contractual covenant of good faith and fair dealing to limit the discretion of one member of a Delaware LLC in taking actions affecting a co-member.

Here’s the link:

https://www.klgatesdelawaredocket.com/2019/07/court-of-chancery-finds-that-the-implied-contractual-covenant-of-good-faith-and-fair-dealing-requires-delaware-llc-to-exercise-discretion-in-good-faith/

PERILS OF A COURT APPOINTED RECEIVER DISSOLVING AN LLC

Handling LLC breakups is a key task for LLC lawyers.  Peter Mahler’s post in his excellent blawg entitled New York Business Divorce concerns a recent NY case in which a court’s appointment of a receiver in the dissolution of an LLC whose members could not work together was, to put it mildly, troublesome.

Here’s the link:

https://www.nybusinessdivorce.com/2019/07/articles/receivership/court-appoints-interim-receiver-for-llc-but-at-what-price/

“NULL AND VOID”

The new post under the link below discusses a Delaware Court of Chancery case that, in essence, upholds, despite traditional equitable considerations, LLC agreement terms providing that certain types of transfers of membership rights will be “null and void.”  The issue addressed in the case lurks in many LLC operating agreements not only under the Delaware Limited Liability Company Act but under many other LLC acts.

Here’s the link:

https://www.klgatesdelawaredocket.com/2019/07/chancery-court-finds-that-language-in-an-llc-agreement-that-states-an-assignment-is-null-and-void-trumps-the-common-law-and-renders-equitable-defenses-ineffective/