Reference no: EM133011471

LipSync LLC was formed to finance, produce, and distribute motion pictures. The interests in the LLC took the form of investment units priced at $5,000 each.

LipSync's Operating Agreement had language in it that stated:

• Each Member is required to participate in the Company's management retaining one (1) vote for each Unit acquired. Each important decision relating to the Company's business must be submitted to a Member vote. The purchase of interests in LipSync LLC is not a passive investment. While specific knowledge and expertise in the day to day operation of a film producing and distributing company is not required, Members should have such knowledge and experience in general business, investment and/or financial affairs as to intelligently exercise their management and voting rights. . . . Further, each Member is required to participate in managing the company by serving on one or more committees that the Members establish.
• Further, the operating agreement stated that:
• "The Company shall be managed by the Members. . . . [E]ach Member shall have the right to act for and bind the Company in the ordinary course of the Company's business.

Problem 1: Based on the information provided above, which of the following is the most accurate statement?

Group of answer choices

a) The Membership interests in LipSync LLC would NOT be considered securities transactions because the language in the Operating Agreement is clear that each member is required to participate in the Company's management and decision making.

b)The Membership interests in LipSync LLC would NOT be considered securities transactions for the very apparent reason that the business entity in question is a Limited Liability Company and not a corporation.

c) The question of whether the Membership Interests in LipSync LLC are securities transactions depends not just on what the Operating Agreement states but on what ACTUAL rolls the Members play in LipSync's management and decision making.

d) The Membership interests in LipSync LLC would be considered securities transactions as long as the Members are actively participating in the management and decision making as spelled out in LIPSYNC's Operating Agreement.