The IRAC method
John, Lesa, and Tabir form a limited liability company. John contributes 60% of the capital, and Lesa and Tabir each contribute 2%. Nothing is decided about how profits will be divided. John assumes that he will be entitled to 60% of the profits, in accordance with his contribution. Lesa and Tabir, however, assume that the profits will be divided equally. A dispute over the profits arises, and ultimately a court has to decide the issue.
Use the IRAC structure to identify issues and apply law and facts to the case. The IRAC method has four steps:
Identify the issue.
Relevant law - Here you need to explain the law, not just state it. This could be sections/s of the Corporations Act or case law.
Application to the facts - the law is applied to the facts of the problem.
Conclusion
What law will the court apply?
In most states, what will result?
How could this dispute have been avoided in the first place?
Application to Facts: In this case, there was no agreement on how profits should be divided amongst John, Lesa and Tabir as nothing had been decided about it when they formed the LLC. Therefore, under Section 125, if any profits arise from their business operations, these will have to be divided between them according to what has been agreed upon unanimously by all three parties. Since there is no such agreement present in this case, each party would be entitled to an equal share of any profits generated by their LLC.
Conclusion: Based on the applicable law stated above and taking into consideration the facts provided in this case, it can be concluded that John, Lesa and Tabir are all entitled to an equal share of any profits generated by their LLC as they have not reached any unanimous agreement regarding how they should divide said profits.