Question

John, Lesa, and Trevor form a limited liability company. John contributes 60 percent of the capital, and Lesa and Trevor each contribute 20 percent. Nothing is decided about how profits will be divided. John assumes that he will be entitled to 60 percent of the profits in accordance with his contribution. Lesa and Trevor, however, assume that the profits will be divided equally. A dispute over the profits arises, and ultimately a court has to decide the issue. What law will the court apply

Answer 1

Answer: State Law.

Explanation:

This dispute falls under the jurisdiction of state law and so that is what the court will use. This is unless the company established a profit-sharing agreement as per the Uniform Limited Liability Company Act (ULLCA) and the state that they are in is one of the 19 states and District that enacted the UCCLA.

As the company never established a profit agreement principle, this falls under State law which normally calls for the division of profits equally amongst partners.