What advice would you provide to able

Assignment Help Business Law and Ethics

Reference no: EM133474461

Case: Able and Baker are certified public accountants, retired from practice in large accounting firms in their hometown.

They formed an LLC to continue offering bookkeeping and payroll services to local businesses. Able contributed $10,000 to the start up costs of the LLC including a deposit on a small office in a strip mall. Baker contributed $5,000. The Operating Agreement provided for issuance of 75% of the membership interest to Able and 25% to Baker and that both would serve as member-managers.

For the first year, they were busy and were able to build a client base. Baker wanted to expand into tax work for individuals and small businesses. Able said that was a bad idea because of increased exposure to negligence claims and higher insurance premiums.

Baker engaged several new tax clients over Able's objections. When Able insisted on having his membership interest redeemed under the Operating Agreement, Baker changed the locks to the office, took over Able's bookkeeping clients, and refused to redeem Able's membership interest.

Shortly after the lockout, one of Baker's tax clients underwent an IRS audit resulting in the assessment of substantial additional taxes and penalties against the client. The client asserted a malpractice claim against the LLC and its insurer.

The breaches of duty of care and the duty of loyalty should be addressed in the context that relates to piercing the veil for an LLC, in regards to the operating agreement for that LLC, and recommend if possible a judiciary dissolution against the LLC.

Question: Able consults you as to his rights and obligations. What advice would you provide to Able?

Reference no: EM133474461

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