Question

Miriam decided to use her consulting talents and experience as a nutritionist to open her own health advisor business. She created an LLC with a capital investment of 200K dirhams, but being short on money, she brought in an investor Bob to put up half the capital in exchange for 50% ownership of the LLC.

She was pleased to have a big demand for her services and her business took off. She decided to hire Zak to create and maintain a mobile phone application for her clients that would enable them to manage their health anywhere and anytime. Miriam was able to obtain a bank loan of 100K dirhams for the creation of the app. Zak’s application was a hit and Miriam was able to further increase sales as a result. One day when he was having some financial trouble, he asked Miriam to help him by loaning him money which he promised to repay within 2 months. Zak had proven he was a loyal employee and Miriam agreed and drew money from her company to give to Zak. Zak repaid the money as promised.

A few months later, Miriam’s house needed 100K in repairs after a severe storm damaged the roof, floors and much of her furniture. She again drew money from her company to pay for the damage but did not repay it because she figured since the company was hers, it was all her money in the end. A few months later, a major sports health company came into the market and created a similar app and nutrition program which caused Miriam to lose clients and eventually lose money such that Miriam decided to shut down the company. At the time she closed the company, there were only 20K dirhams left in the bank account.

What, if anything, can Miriam recoup from the company?

Answer 1

Miriam, as a 50% owner of her health advisor LLC, could potentially recoup 10K dirhams from the remaining 20K in the business account after her company closes. However, her ability to recover these funds is conditioned upon the settlement of any outstanding business debts and liabilities.

Step-by-step explanation:

The question revolves around Miriam, a nutritionist who started her own health advisor business and now faces financial challenges due to market competition. Upon starting, she created an LLC and required capital was obtained by contributing her own funds and bringing in an investor named Bob, a common practice for small businesses. This is an example of how business owners often turn to personal savings or angel investors for startup funds.

When Miriam was in a personal financial bind due to storm damage to her house, she drew money from the company without repayment, which illustrates the blending of personal and business funds, a common pitfall in small businesses. However, when the business’s profitability declined and she was forced to close, the company's remaining funds were very limited.

In terms of recouping her losses, assuming Miriam’s LLC was structured to separate personal and business finances, she could only claim what was left in the business account and divided according to her ownership percentage, which in this case is 50%, since she shared the business with Bob. Therefore, she might recoup 10K dirhams, but this would be subject to any outstanding debts and creditor claims on the business first.