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Outside accounting ordered in LLC dissolution

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The Indiana Court of Appeals reversed a judgment in favor of one of the owners of a dissolved LLC, finding the trial court erred when it entered judgment against the other owner personally without ordering an outside accounting of the company's finances.

In Jeff Perkins v. James R. Brown, No. 49A02-0806-CV-569, Jeff Perkins appealed a judgment entered against him for $155,175, which represented 50 percent of the net profits and retained earnings of his and James Brown's executive search firm, Kessler Advisor LLC. When the company was formed, Perkins handled business development, and Brown handled search work, sent invoices to clients, and managed the accounting needs.

Brown objected to Perkins' desire to give greater compensation for business development instead of the even split between their two job duties. Actions were taken to keep him from having access Kessler's business, accounting, and customer information.

Brown filed a complaint against Perkins and Kessler, requesting declaratory judgment as to the ownership percentages, an equitable accounting of the company, and that it is dissolved with the net remaining assets distributed according to the ownership percentages.

Brown submitted evidence at trial that he believed Kessler's total income was nearly $388,000 and that usually 20 percent of that was used to cover operating expenses. Judgment was granted in favor of Brown and against Kessler and Perkins, awarding Perkins and Brown $155,175 each. Perkins filed a motion to correct error, which was denied. Brown's motion to amend the pleadings was granted.

The trial court erred in determining the amount of damages in the dissolution of Kessler without ordering an outside accounting of the company's finances, wrote Judge James Kirsch. There was no evidence presented at trial of what the actual finances of the company were prior to the dissolution, what income it actually received or what the expenses were at this time.

Without any direct evidence, the trial court couldn't accurately determine if Kessler had all the money it was owed from outstanding invoices, who its creditors were, and if 20 percent would have covered all the expenses, wrote the judge. Plus, the trial court was unable to determine whether Perkins made any distributions during this period of time that would have created personal liability.

Asset distribution upon the ending of an LLC must be distributed according to Indiana Code Section 23-18-9-6, but without the outside accounting, the Court of Appeals can't tell the assets were distributed according to the statute.

The appellate court reversed the denial of Perkins' motion to correct error and remanded with instructions for the trial court to order and oversee an outside accounting to determine the proper distribution to Kessler's creditors as well as to Brown and Perkins. The trial court also shall make an appropriate entry of damages due to each party, including any determination of personal liability of Perkins under the Indiana Business Flexibility Act.

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  1. I work with some older lawyers in the 70s, 80s, and they are sharp as tacks compared to the foggy minded, undisciplined, inexperienced, listless & aimless "youths" being churned out by the diploma mill law schools by the tens of thousands. A client is generally lucky to land a lawyer who has decided to stay in practice a long time. Young people shouldn't kid themselves. Experience is golden especially in something like law. When you start out as a new lawyer you are about as powerful as a babe in the cradle. Whereas the silver halo of age usually crowns someone who can strike like thunder.

  2. YES I WENT THROUGH THIS BEFORE IN A DIFFERENT SITUATION WITH MY YOUNGEST SON PEOPLE NEED TO LEAVE US ALONE WITH DCS IF WE ARE NOT HURTING OR NEGLECT OUR CHILDREN WHY ARE THEY EVEN CALLED OUT AND THE PEOPLE MAKING FALSE REPORTS NEED TO GO TO JAIL AND HAVE A CLASS D FELONY ON THERE RECORD TO SEE HOW IT FEELS. I WENT THREW ALOT WHEN HE WAS TAKEN WHAT ELSE DOES THESE SCHOOL WANT ME TO SERVE 25 YEARS TO LIFE ON LIES THERE TELLING OR EVEN LE SAME THING LIED TO THE COUNTY PROSECUTOR JUST SO I WOULD GET ARRESTED AND GET TIME HE THOUGHT AND IT TURNED OUT I DID WHAT I HAD TO DO NOT PROUD OF WHAT HAPPEN AND SHOULD KNOW ABOUT SEEKING MEDICAL ATTENTION FOR MY CHILD I AM DISABLED AND SICK OF GETTING TREATED BADLY HOW WOULD THEY LIKE IT IF I CALLED APS ON THEM FOR A CHANGE THEN THEY CAN COME AND ARREST THEM RIGHT OUT OF THE SCHOOL. NOW WE ARE HOMELESS AND THE CHILDREN ARE STAYING WITH A RELATIVE AND GUARDIAN AND THE SCHOOL WON'T LET THEM GO TO SCHOOL THERE BUT WANT THEM TO GO TO SCHOOL WHERE BULLYING IS ALLOWED REAL SMART THINKING ON A SCHOOL STAFF.

  3. Family court judges never fail to surprise me with their irrational thinking. First of all any man who abuses his wife is not fit to be a parent. A man who can't control his anger should not be allowed around his child unsupervised period. Just because he's never been convicted of abusing his child doesn't mean he won't and maybe he hasn't but a man that has such poor judgement and control is not fit to parent without oversight - only a moron would think otherwise. Secondly, why should the mother have to pay? He's the one who made the poor decisions to abuse and he should be the one to pay the price - monetarily and otherwise. Yes it's sad that the little girl may be deprived of her father, but really what kind of father is he - the one that abuses her mother the one that can't even step up and do what's necessary on his own instead the abused mother is to pay for him???? What is this Judge thinking? Another example of how this world rewards bad behavior and punishes those who do right. Way to go Judge - NOT.

  4. Right on. Legalize it. We can take billions away from the drug cartels and help reduce violence in central America and more unwanted illegal immigration all in one fell swoop. cut taxes on the savings from needless incarcerations. On and stop eroding our fourth amendment freedom or whatever's left of it.

  5. "...a switch from crop production to hog production "does not constitute a significant change."??? REALLY?!?! Any judge that cannot see a significant difference between a plant and an animal needs to find another line of work.

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