News & Analysis as of

Operating Agreements Limited Liability Company (LLC)

First Department Affirms that an LLC’s Operating Agreement Trumps Delaware Law

A unanimous panel of the Appellate Division, First Department recently affirmed a ruling by the Commercial Division dismissing causes of action against the ACE Group International LLC (“AGI”) brought by the estate of the...more

Special Proceeding Seeking a Judicial Decree to Dissolve an LLC

In Advanced 23, LLC v. Chambers House Partners, LLC, No. 650025/2016, 2017 BL 462831 (NY. Sup. Ct. Dec. 15, 2017), Justice Saliann Scarpulla of the Commercial Division ruled that Advanced 23, LLC (“Advanced”) and David...more

Second Department Affirms Commercial Division Decisions Leaving Withdrawing LLC Members Without Compensation for Their Membership...

In Matter of Jacobs v. Cartalemi, No. 2016-05041, 2017 BL 435890 (2d Dep’t Dec. 6, 2017) (“Jacobs I”), a unanimous Appellate Division, Second Department panel affirmed an order by Westchester County Commercial Division...more

Top 10 New York Commercial Division Cases and Developments of 2017

In 2017, the New York Commercial Division continued to implement new rules and refine existing rules in order to streamline litigation in the court. The year also saw some key decisions by the Commercial Division as well as...more

Top 10 Business Divorce Cases of 2017

by Farrell Fritz, P.C. on

I’m delighted to present my 10th annual list of this past year’s ten most significant business divorce cases. This year’s list includes seven noteworthy appellate decisions, two of which — Mace v Tunick and Shapiro v...more

Delaware Contractarian Principles Prevail in Appeal Over Deceased Ace Hotel Founder’s LLC Interest

by Farrell Fritz, P.C. on

The sudden death of Alexander Calderwood, the brilliant but troubled co-founder of the Ace brand of hotels, resulted in some fierce litigation between Calderwood’s estate and Calderwood’s LLC co-member over the nature of his...more

Early New Year’s Resolution: Update Partnership and LLC Agreements to Comply with New IRS Audit Rules

In 2015, Congress repealed the complex and heavily criticized Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”) partnership-level audit rules which apply to partnerships and most LLCs. The new audit rules, which...more

Operating Agreement Defeats Statutory Buyout Rights Upon LLC Member’s Withdrawal

by Farrell Fritz, P.C. on

When the tsunami of LLC enabling statutes swept the U.S. in the late ’80s and early ’90s, including New York in 1994, many included a default rule authorizing as-of-right member withdrawal and payment for the “fair value” of...more

Court: Operating Agreement Did Not Grant Terminated Employees Lifetime Jobs

by Allen Matkins on

An employment agreement is one thing and an operating agreement quite another. In ITV Gurney Holding Inc. v. Gurney, Cal. Ct. Appeal Case No. B281694, the board of a limited liability company fired two employees who were...more

Tax Audit Risk Shifted from Partners to Partnership

by King, Krebs & Jurgens, PLLC on

NEW TAX PARTNERSHIP AUDIT PROCEDURES - A legislative change to partnership tax audit procedures enacted under the Obama administration is set to go into effect as of January 1, 2018. All tax partnerships need to be...more

Can the Bare Naked Assignee Demand Access to LLC Records?

by Farrell Fritz, P.C. on

I wish I could take credit for it, but I can’t. The phrase “bare naked assignee” was coined by the preeminent scholar and LLC maven Professor Daniel Kleinberger whose massive oeuvre (not to mention his guest posts on this...more

What’s the Big Deal? The Importance of Having an Operating Agreement for Your LLC

by Varnum LLP on

So, you've started a business with your buddy. Enthusiasm is high, things look promising, and you've decided to formally register your business as a limited liability company (or, ahem, if you haven't formally registered your...more

“Where’s the Beef?” Says Appeals Court, Reversing LLC Dissolution

by Farrell Fritz, P.C. on

A dissolution petitioner received the judicial equivalent of the old quip “Where’s the beef?” in a Brooklyn appeals court decision last week reversing an order dissolving a limited liability company under Section 702 of the...more

Court Rules LLC Members May Be “Fiduciaries In Fact”

by Allen Matkins on

U.S. District Court Judge Tena Campbell’s ruling in Strong v. Cochran, 2017 U.S. Dist. LEXIS 170073, is a reminder that sometimes what you do matters more than what you say. The case involved claims by the liquidating...more

Is a Series LLC Right for Your Business?

by Mintz Levin on

The Series limited liability company (the “Series LLC”) is more nuanced than an ordinary limited liability company, and for the right user, it provides flexibility that will streamline administration better than other...more

A Member By Any Other Name . . . May Have Access to LLC Books and Records

by Farrell Fritz, P.C. on

I’ve said it before, I’ll say it again: for professionals who dwell in the world of LLCs, whether as transactional, tax, or litigation counsel, attending the annual, two-day LLC Institute, sponsored by the LLCs, Partnerships...more

Bankruptcy Restrictions in Operating Agreement Held Unenforceable

In In Re Lexington Hospitality Group, LLC, the United States Bankruptcy Court for the Eastern District of Kentucky thwarted a lender’s efforts to control whether its borrower could file bankruptcy. As a condition to the loan,...more

LLC’s Purpose Being Achieved? Business Doing Fine? Good Luck Getting Judicial Dissolution

by Farrell Fritz, P.C. on

New York’s LLC judicial dissolution statute, Section 702 of the Limited Liability Company Law, provides far more limited grounds to dissolve a business than the Business Corporation Law – a harsh reality for allegedly...more

Alert: The New Connecticut Uniform Limited Liability Company Act and its Effect on Your Operating Agreement

by Pullman & Comley, LLC on

The Connecticut Uniform Limited Liability Company Act (“CULLCA”) went into effect in Connecticut on July 1, 2017. The new statute replaces Connecticut’s limited liability company act (the “Old LLC Act”) and is based on the...more

When Can an Outside Attorney Serve as a Special Litigation Committee in an LLC Derivative Suit? When the Parties’ Contract Says...

In a decision handed down on August 15, 2017 by the New York Appellate Division First Department, the court endorsed the practice of the appointment of a Special Litigation Committee (SLC) by a limited liability company (LLC)...more

Reflecting The Parties’ Intentions In Operating Agreements: Reminder On Silent Terms

by Cole Schotz on

Does your operating agreement reflect your intentions? New Jersey’s Revised Uniform Limited Liability Company Act (the “RULLCA”) became effective on March 18, 2013. As noted in a post we authored in 2014, although initially...more

Episode 014: Business Divorce Stories: Business Appraiser Tony Cotrupe and Attorney Jeff Eilender

by Farrell Fritz, P.C. on

This is the first in what I hope will be a recurring feature of this podcast featuring war stories told by business divorce professionals. In this episode we hear stories from business appraiser Tony Cotrupe (Meliora...more

Minnesota’s New LLC Act Takes Full Effect On January 1

by Fox Rothschild LLP on

An overhaul of Minnesota corporate law on limited liability companies, or LLCs, that was phased in over three years will take full effect in January 2018. The new act differs significantly from the old act, but is modeled...more

Summer Shorts: Three Must-Read Decisions

by Farrell Fritz, P.C. on

Regular readers of this blog know it’s been anything but summer doldrums in the world of business divorce, what with case law developments such as the Appellate Division’s potentially far-reaching ruling on the purposeless...more

The Second Department Suggests That “Any Lawful Business” Clauses May Be Effectively Meaningless in LLC Dissolution Cases

In actions brought by minority members to dissolve an LLC, a key inquiry is whether the LLC’s managers are unable or unwilling to permit or promote the LLC’s “stated purpose.” In many cases, an LLC’s operating agreement...more

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