Maury and Sons Transition to a Limited Liability Company

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                                                                                                                           Maury and Sons

Maury and Sons Transition to a Limited Liability Company

Law 529


December 7, 2004

Maury and Sons Transition to a Limited Liability Company

Business ownership is a balance between the rewards of success and the risk of failure.  Maury and Sons is an example of a success in the small business ownership.  Maury and Sons is an oilfield-drilling contractor that is doing well, with lucrative contracts awarded to them in the past year for over one million dollars in revenue from ExxonMobil and BP-Amoco.   Maury and Sons is a business that is lead by Max and Monty, both are grandsons of the founder Maury, which employs fifty oilrig crewmembers and ten administrative positions.  Maury and Sons, having reached the one million dollar milestone for the first time this year, have decided that now is the time to limit their own liability, but still lead the business to a successful future.  After careful review, and considering the many other options available, Maury and Sons have decided to become a Limited Liability Company instead of remaining a partnership that it is today.

        Max and Monty each own twenty-five percent of the business, with the remaining ownership being held by their two aunts.  The two aunts, Wilma and Betty, are both in their early eighties and provide no significant activity in the daily operations of the business.  As the two aunts are elderly, a decision had to be made what is to be done with either Wilma or Betty’s interests in the event of death.  Neither of these women have any surviving spouses and never had children.  Max and Monty want to do what is best for their aunts in addition for what is best for the business.  Maury and Sons never had a formal partnership agreement in place even after Maury, the founder, brought in Wilma and Betty’s husbands as partners into the business.  So after reviewing and discussing the pros and cons of remaining a partnership, incorporating the oil drilling business, or establishing a limited liability company, all parties involved have taken the recommendation of forming a limited liability company, or LLC for short.

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        The vision or idea that Monty and Max have for Maury and Sons is to continue to build the business, then sell the business to a consolidator in due time.  A consolidator is company that buys local businesses, usually in exchange for a combination of stock, cash, and debt. In completing the research, and weighing the options, establishing Maury and Sons as a LLC provides numerous advantages over the partnership agreement that currently is in place.  According to Mallor et al (2004), a Limited Liability Company provides the favorable tax advantages of partnerships while limiting the personal liability to its ...

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