Question

Joshua, Rachel, and Daniel formed an LLC to manage their accounting business. Joshua contributed $20,000 to...

Joshua, Rachel, and Daniel formed an LLC to manage their accounting business. Joshua contributed $20,000 to the LLC. Rachel and Daniel contributed $40,000 each. A year later, the LLC needed capital injection and Joshua lent a credit of $50,000. However, nothing could save the LLC and it entered bankruptcy and was dissolved. Joshua was the only creditor of the LLC. If a total of $50,000 was obtained after the sale of all the assets of the dissolved LLC, how much will Rachel get?

Multiple Choice

  • $0

  • $10,000

  • $50,000

  • $25,000

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Answer #1

Answer:-->The Correct option is $ 0.

According to the Revised Uniform Limited Liability Company Act or “RULLCA",in case of dissolution of LLC, after Selling of all the LLC Assets, the proceeds should be distributed first to LLC creditors, including members who are creditors. Since Joshua had given the LLC a credit of $50,000 and a total of $50,000 was obtained after sale of all the LLC Assets, the whole amount of $ 50000 will be received by Joshua as he is the only creditor to LLC and Rachel will get $ 0.

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