Question

StartUp Investors, LLC, is a limited liability company without a written operating agreement. Among the members, a dispute arises concerning the division of profits. Under most LLC statutes, the profits will be:___________a. distributed according to the members' proportionate shares of ownership in the firm.b. divided equally among the members.c. forfeited to the state.d. reinvested in the business until the dispute is resolved.

Answer 1

Answer:

The answer is a:

distributed according to the members' proportionate shares of ownership in the firm.

Explanation:

A limited liability company (LLC) is a corporate structure, whereby the owners are not personally liable for the company's debts or liabilities. Limited liability companies are hybrid entities that combine the characteristics of a corporation with those of a partnership or sole proprietorship.

LLCs are governed by the rules of the state in which they were formed. State rules provide for the allocation of LLC profit according to each member's percentage of ownership interest.

In this scenario, the written operating agreement does not exist. If a profit allocation arrangement is not outlined in the operating agreement, or the operating agreement is not formed, then the state's default profit allocation rules will apply, requiring profits to be distributed according to their percentage of ownership.