Asked by Summer Garrett on Apr 25, 2024
Verified
Josh,Betty,and Danny formed an LLC to manage their accounting business.Josh contributed $20,000 to the LLC.Betty and Danny contributed $40,000 each.Being close friends,they did not include a profit and loss sharing plan in the operating agreement.A year later,they realize their working styles do not match.All the members agree to dissolve the LLC and sell all of its assets.Assuming that the LLC did not have any creditors and a total of $175,000 was obtained after the sale of all the assets of the dissolved LLC,how much will Betty get?
A) $100,000
B) $75,000
C) $50,000
D) $65,000
Operating Agreement
A legal document outlining the governance and operational protocols of a Limited Liability Company (LLC), agreed upon by its members.
Profit and Loss
A financial statement summarizing the revenues, costs, and expenses incurred during a specified period.
LLC
Short for Limited Liability Company, a flexible form of business enterprise that blends elements of partnership and corporate structures.
- Understand the distribution of assets upon dissolution of an LLC and how contributions impact members’ shares.
Verified Answer
KK
Kishankumar Kalidas Patel7 days ago
Final Answer :
D
Explanation :
According to the RULLCA,after all the LLC assets have been sold,the proceeds should be distributed first to LLC creditors.If there are excess proceeds,members' contributions are returned next.Any remaining proceeds are distributed in proportion to how they share profits.In this case,the LLC did not have any creditors or a profit and loss sharing plan in the agreement.Therefore,Betty will get a total of $65,000 which includes her contribution ($40,000)plus a third of the remaining $75,000 ($25,000).
Learning Objectives
- Understand the distribution of assets upon dissolution of an LLC and how contributions impact members’ shares.