PROBLEM: Sam, Mark and Willy have decided to open a sporting goods store in Frederick, Maryland to sell unusual fishing rods and other fishing equipment. They come to you, a Maryland attorney, for advice on the formation of the business entity and for the preparation of the documents to accomplish the following goals:
1. Sam, Mark and Willy will each invest $20,000, and each will receive an equal ownership interest in the business. They neither want to invest any additional cash into the business nor have any personal responsibility for the debts of the business.
2. Sam will loan the business an additional $10,000, which will bear interest at 6% and will be repaid in equal monthly installments over a 3 year period. Other terms and provisions will be decided by them later.
3. They do not wish to be bothered with any formalities to maintain the business other than accounting, tax and governmental reporting requirements.
4. All profits and losses of the business will be shared equally by Sam, Mark and Willy.
5. Mark will be responsible solely for the daily operations of the business. He will receive an annual salary of $30,000.
6. Sam and Willy insist that all three of them must consent to: a. Relocation of the business b. Borrowing money for the business c. Selection of equipment and rod suppliers, and d. Selling the business.
You recommend to Sam, Mark and Willy that they form a limited liability company (LLC)
Please prepare a memo to Sam, Mark and Willey and answer the following questions based on the facts presented above:
1. Why would an LLC best achieve their goals?
2. What document would you need to draft in order to form the LLC and where will you have to file this document?
3. What document would you need to draft to accomplish the goals listed above?
4. What advice would you give Sam, Mark and Willy regarding the following? a. Management of the LLC b. Liability of LLC members c. Duty of loyalty d. Agency authority e. Dissolution.