Limited Liability Business Forms


The city of Papagos, Arizona, had a deteriorating bridge in need of repair on a prominent public roadway. The city
posted notices seeking proposals for an artistic bridge design and reconstruction. Davidson Masonry, LLC, which was
owned and managed by Carl Davidson and his wife, Marilyn Rowe, decided to submit a bid to create a decorative con–
crete structure that incorporated artistic metalwork. They contacted Shana Lafayette, a local sculptor who specialized
in large-scale metal creations, to help them design the bridge. The city selected their bridge design and awarded them
the contract for a commission of $184,000.
Davidson Masonry and Lafayette then entered into an agreement to work together on the bridge project. Davidson
Masonry agreed to install and pay for concrete and structural work, and Lafayette agreed to install the metalwork at
her expense. They agreed that overall profits would be split, with 25 percent going to Lafayette and 75 percent going to
Davidson Masonry. Lafayette designed numerous metal sculptures of trout that were incorporated into colorful deco–
rative concrete forms designed by Rowe. Davidson performed the structural engineering. The group worked together
successfully until the completion of the project. Using the information presented in the chapter, answer the following
questions.

1. Would Davidson Masonry automatically be taxed as a partnership or a corporation?

2. Is Davidson Masonry member managed or manager managed?

3. Suppose that during construction, Lafayette asked Carl Davidson to rent space in a warehouse that was close to
the bridge so that she could work on her sculptures near the site where they would eventually be installed. Carl
Davidson signed the rental contract in his own name rather than the name of the LLC. The other members of
Davidson Masonry were not aware of the rental agreement. In this situation, would a court likely hold that David–
son Masonry was liable on the contract that Carl Davidson had entered? Why or why not?

4. Now suppose that Rowe has an argument with her husband and wants to withdraw from being a member of David–
son Masonry. What is the term for such a withdrawal, and what effect would it have on the LLC