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Wyoming secretary of state.3 The revised operating agreement
states that neither LCL member is required to make any additional
capital contribution to LCL.
Section 7.7 of the revised operating agreement contains the
DRO.4 That provision states as follows:
Deficit Capital Account Restoration. If any Partner
has a deficit Capital Account following the liquidation
of his, her or its interest in the partnership, then
he, she or it shall restore the amount of such deficit
balance to the Partnership by the end of such taxable
year or, if later, within 90 days after the date of
such liquidation, for payment to creditors or
distribution to Partners with positive capital account
balances.
Provision Concerning Potential Third-Party Beneficiaries
The revised operating agreement contains a provision
concerning potential third-party beneficiaries. As stated in
section 20.9 of that agreement:
Nothing express or implied in this Agreement is
intended or shall be construed to confer upon or to
give any person or entity, other than the parties or
their successors-in-interest in accordance with the
provision of this Agreement, any rights or remedies
hereunder or by reason hereof.
3 The initial operating agreement states that the term is 10
years unless dissolved earlier pursuant to the provisions of that
agreement.
4 A partnership (or another type of entity treated as a
partnership) typically includes a DRO in its operating agreement
so that the allocations of income, gain, loss, deduction, or
credit (or item thereof) stated in the agreement have
“substantial economic effect” within the meaning of sec.
704(b)(2). See generally sec. 1.704-1(b), Income Tax Regs., and
especially par. (2)(ii)(b)(3) thereof.
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Last modified: March 27, 2008