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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. CCHP's real accomplishment is the 2015 law signed by Gov Pence that basically outlaws any annexation that is forced where a 65% majority of landowners in the affected area disagree. Regardless of whether HP wins or loses, the citizens of Indiana will not have another fiasco like this. The law Gov Pence signed is a direct result of this malgovernance.

  2. I gave tempparry guardship to a friend of my granddaughter in 2012. I went to prison. I had custody. My daughter went to prison to. We are out. My daughter gave me custody but can get her back. She was not order to give me custody . but now we want granddaughter back from friend. She's 14 now. What rights do we have

  3. This sure is not what most who value good governance consider the Rule of Law to entail: "In a letter dated March 2, which Brizzi forwarded to IBJ, the commission dismissed the grievance “on grounds that there is not reasonable cause to believe that you are guilty of misconduct.”" Yet two month later reasonable cause does exist? (Or is the commission forging ahead, the need for reasonable belief be damned? -- A seeming violation of the Rules of Profession Ethics on the part of the commission) Could the rule of law theory cause one to believe that an explanation is in order? Could it be that Hoosier attorneys live under Imperial Law (which is also a t-word that rhymes with infamy) in which the Platonic guardians can do no wrong and never owe the plebeian class any explanation for their powerful actions. (Might makes it right?) Could this be a case of politics directing the commission, as celebrated IU Mauer Professor (the late) Patrick Baude warned was happening 20 years ago in his controversial (whisteblowing) ethics lecture on a quite similar topic: http://www.repository.law.indiana.edu/cgi/viewcontent.cgi?article=1498&context=ilj

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  5. Here's an idea...how about we MORE heavily regulate the law schools to reduce the surplus of graduates, driving starting salaries up for those new grads, so that we can all pay our insane amount of student loans off in a reasonable amount of time and then be able to afford to do pro bono & low-fee work? I've got friends in other industries, radiology for example, and their schools accept a very limited number of students so there will never be a glut of new grads and everyone's pay stays high. For example, my radiologist friend's school accepted just six new students per year.

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