it could obtain, a better offer for the property. Are there any circumstances under which this reason could justify 607 South Park’s behavior? While there may have been one or more business reasons to repudiate the real estate sales contract, 607 South Park certainly was not acting in an ethical manner when it did so. Good financial reasons do not support a justification of behavior that is unethical.
CHAPTER 37: LIMITED LIABILITY COMPANIES AND SPECIAL BUSINESS FORMS 227 D. J URISDICTIONAL R EQUIREMENTS For jurisdictional purposes, an LLC is a citizen of every state of which its members are citizens. E. A DVANTAGES AND D ISADVANTAGES OF THE LLC 1. Advantages An LLC is a hybrid form of business enterprise that offers the limited liability of the corpo- ration and the tax advantages of a partnership. LLCs with two or more members can elect to be taxed as either a partnership or a corporation. If no choice is made, an LLC is taxed as a partnership. One-member LLCs are taxed as sole proprietorships unless they elect to be taxed as corporations. Other advantages include the LLC’s flexible operations and management characteristics. 2. Disadvantages These include the lack of uniformity among state LLC statutes.
228 INSTRUCTOR’S MANUAL TO ACCOMPANY BUSINESS LAW , ELEVENTH EDITION F. T HE LLC O PERATING A GREEMENT Members decide how to operate the business. An operating agreement does not need to be in writing. If an agreement does not cover a point in dispute, the governing LLC statute controls. If an issue comes under neither an agreement nor a statute, the principles of partnership law apply. II. Management of an LLC The hallmark of an LLC is its flexibility in operations and management. A. P ARTICIPATION IN M ANAGEMENT Unless the articles of organization specify otherwise, an LLC is considered to be member-managed. In a member-managed LLC, all members participate in management [ULLCA 404(a)]. In a manager-managed LLC, the members designate a group of persons (member or not) to manage the firm. Managers owe fiduciary duties of loyalty and care to the LLC and its members [ULLCA 409(a), (h)]. B. O PERATING P ROCEDURES The LLC’s operating agreement may also specify procedures for making decisions. If it does not, choosing and removing managers is done by majority vote [ULLCA 404(b)(3)]. Details concerning meetings and voting rights may also be included in the agreement. If not, in some states, each member has one vote.
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