ASSET PROTECTION

The cats and I have decided to go into the publishing business.  I am to write stories and pay for the costs of publication, and they will contribute their business expertise.  They propose that we be equal partners, one-third each.  I suggest that we split the profits 50-50, half for me and half for them.  They mention that they have consulted a law firm in San Francisco with regard to a potential claim they have against me for casting them in a false light, but they are willing to release me from that claim as part of their agreement with me for a three-way split.   I agree that we will split the profit three ways.

They would like me to prepare a family limited liability company (FLLC) in order to protect their interest in the business from their creditors.  They have received dunning notices from their Hong Kong distributor for shipping and restocking charges for the goods that they returned when they closed their retail outlet and for the wholesale cost of a leather dog collar ($2.75) that was not returned.  They dispute the charges and claim that the dog collar was never received.

I agree to set up the FLLC and to prepare an asset protection operating agreement that provides, among other protections, that the cats are not entitled to any distributions from the FLLC except in the sole discretion of the manager (myself), who cannot be removed by the cats.  The cats are pleased, but, since their interest in the FLLC will be their primary asset, they want the operating agreement to be reviewed by their San Francisco attorneys prior to signing it.  Three weeks later they get the OK from their attorneys to proceed with the FLLC, and we start operations.

The first response that we get from our advertising is from the cats’ Hong Kong distributor demanding payment and threatening a lawsuit that will result in a charging order attaching the cats’ distributions from the FLLC.  I write back and explain that the cats are not entitled to distributions from the FLLC but that I will keep their letter on file.

The cats are purring for the first time since they were in the San Juans.

Allen Drescher has practiced law in Ashland and Southern Oregon since 1973.  His practice areas include real estate, business law, estate planning and elder law.

© Allen Drescher