An Ounce of Prevention is Worth a Pound of Cure

In describing an odd Limited Liability Company (“LLC”) formation that ended in a court battle, the Tennessee Court of Appeals stated that “[a]s was the case with Alice in Wonderland, the evidence reveals that the parties wanted to go “somewhere,” and as the Cheshire Cat explained, if you want to go somewhere, ‘you’re sure to do that, if only you walk long enough.’”  In Parigin v. Mills, the parties successfully formed an LLC.  As the Tennessee Court of Appeals explained, the parties started-off on the right foot by hiring a lawyer, but the parties failed to consult with the lawyer when prospective members changed and when at least one of those perspective members failed to perform under the previously drafted operating agreement.

 

The importance of Parigin is not that the Court of Appeals adopted new or interesting principles of law; the importance of Parigin is that it stands for a stark reminder of the importance of hiring a trusted attorney and following that attorney’s advice.  The Tennessee and Virginia LLC Acts create straightforward roadmaps to LLC formation, financing, operation, and dissolution; and online legal services offer a slew of generic forms for entity formation along with other legal documents.  So what could go wrong with a straightforward “do-it-yourself” LLC formation using generic forms?  It is likely that after five and a half years of litigation, the litigants in Parigin can expound on the subject.

 

Generic forms are great for generic issues.  The reality, though, is that very few legal issues are generic.  As is the case with many legal issues, there are a multitude of issues to address.  Lawyers make a living by splitting hairs.  Those same lawyers write our laws and become the judges that interpret the law.  Lawyers are trained to issue spot, think strategically, and advise.  As the litigants in Parigin found after five and a half years of litigation, it is expensive and time consuming to make a legal misstep – even in something as seemingly simple as an LLC formation.  An ounce of prevention is worth a pound of cure – talk with a trusted attorney when a legal issue presents itself.

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Parigin v. Mills, 2017 WL 1032740 at *7 (Tenn. Ct. App. 2017) quoting Lewis Carroll, Alice’s Adventures in Wonderland 89-90 (Volume One Publishing 1998).

Parigin v. Mills, 2017 WL 1032740 (Tenn. Ct. App. 2017).