Corporate Operating Agreements

Ron Cardigan, son of Camille and Ray (Camille’s first husband) has met with Camille and Candie to form a limited liability company designed to be a place where young future clothing designers can work as part of an internship before entering fashion design school. Ron contributes 40% of the capital, and Camille and Candie each contribute 30%. Because it was Ron’s idea, he assumes he will receive more of the profits than Camille and Candie. Further, his contribution was greater than each of theirs. Camille and Candie feel they should all split the profits equally, as everyone has a unique talent that is being brought forth to run the new business. A dispute over the profits arises, and ultimately a court has to decide the issue.

Determine the following:

1. What law will the court apply?

2. In most states, what will result?

3. How could this dispute have been avoided in the first place? Assess fully.