You have been given the following fact pattern by Judith Harris, one of the senior partners in your law firm.
The firm represents Stephen Miller who is one of four members of a limited liability company organized in our state. When the limited liability company was organized last year, Mr. Miller contributed 70 percent of its capital. The other three members each contributed 10 percent of the company’s capital. Although the company has a written operating agreement that governs many of its procedures and operations, the agreement is silent on distributions of profits. The company has $100,000 of profits that it intends to distribute. The managing member of the company, Joshua Adams, has stated that each member will receive $25,000. Because Mr. Miller contributed 70 percent of the company’s capital, he believes he is entitled to a distribution of $70,000.
Ms. Harris would like you to prepare an opinion letter (for her signature) to Mr. Miller explaining how the company’s profits will be distributed.
By way of background, the Uniform Limited Liability Company Act (Revised) includes provisions relating to distributions of profits. Our state has adopted the Act in its entirety. The Act is available on the website of the National Conference of Commissioners on Uniform State Laws at http://www.uniformlaws.org. Assume there are no cases interpreting the applicable provisions of the Act.