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This is Why You Shouldn’t Propose on Valentine’s Day in Montana

By David J. Pigott, Esq.
Posted on 2-16-2015

Gentlemen, if you’ve been with your significant other for a while, you might be thinking about popping the question. You might even be thinking about doing it on Valentine’s Day. While one recent survey[1] suggests that many women would cherish a Valentine’s Day proposal, there are plenty of reasons why Valentine’s Day might not be the best idea.[2] I’m going to add one more… if things go south, you might not get the ring back.

I’m sure the last thing you want to think about right now is a busted engagement, but it’s a possibility; and, if you’re motivation for proposing is due (in part) to the pressure to do something romantic on Valentine’s Day, the odds are that much greater. Assuming you’re spending a few bucks on the engagement ring (of course you are), you’re going to want that puppy back if you discover she’s not your Buttercup prior to the Wedding.

Under Colorado law, an engagement ring is a gift. There is a clear an unmistakable intention to make the gift (you down on one knee holding up a giant diamond), there is acceptance of the gift (her saying “yes!”), and there is an actual transfer of property (you sliding the ring onto her finger).

Having said that, under Colorado law, an engagement ring is a conditional gift. The giving of the gift is conditioned upon marriage. If the marriage never happens, the act of giving the gift is never completed, and you can ask for the ring back.

So, why might a Valentine’s Day proposal screw this up? Because a Valentine’s Day proposal (or a proposal on any gift-giving holiday) allows one to argue that the engagement ring was not aconditional gift but an absolute gift given as an expression of love for that particular holiday and nothing else. Odds are, such an argument would fail if actually tested in Court; but, why take chances? You can guard against the worst case scenario and not be lame simply by proposing on a non-holiday.

Here’s another reason to make sure you’re proposing to the right person: if you are the giver of the engagement ring, and it’s your fault the wedding never happens (the condition upon which the gift of the engagement ring is based), you may not get the ring back. Fault, in this case, is hard to prove. Even if you’re the one who says “we probably shouldn’t get married,” the Court is going to see that as a mutual agreement and dictate the return of the ring. Fault usually involves some type of impropriety like abuse; but, again, why take chances? Be sure.

While we’re on the subject, don’t propose in Montana, either. In 2002, the Montana Supreme Court declared an engagement ring to be an absolute gift no matter what. If you propose in Montana, the ring belongs to your fiancé the instant you give it. No takeses backses. Ever.

Generally speaking, etiquette and legal precedent in most states (including Colorado) dictate the return of an engagement ring if the marriage doesn’t take place. The absolute gift exception is going to be incredibly hard to prove even if the proposal came on a holiday. Fault is also going to be very difficult to prove even if you’re the one who breaks off the engagement. Nevertheless, be smart (and romantic). Propose someplace in non-Montana at a time that means something to you and your soon-to-be betrothed not Hallmark.

Dave, ignoring his own advice, proposed to his girlfriend Charlie on Mother’s day of last year. The two are set to be married on March 17th, so he will be out of the office from March 14th – March 27th. The rest of the firm will be around for any questions that may come up during that time!



Operating Agreements for Colorado LLCs: What Really Matters

Operating Agreements for Colorado LLCs: What Really Matters

By Audris G. Hampton, Esq.
Posted on 2-3-2015
CATEGORIES: Business Law

In Colorado, a limited liability company (LLC) is formed, effectively, through a document that complies with the substantive and statutory requirements for the LLC’s “Articles of Organization” (Articles). The Articles are an LLC’s most important document. The next most important document is the LLC’s Operating Agreement (OA).

An OA should address the “nature and affairs …of the [LLC’s] business.” In that context, an OA should focus upon four primary categories of structural and functional interactivity between the LLC and those who interact with an LLC (e.g., the LLC’s managers, members, and the members’ assignees and transferees; as well as the LLC’s fiduciaries, officers, and agents; etc.).

The OA’s four categories of focus are topically-oriented towards two basic areas of an LLC’s existence, relationships, and practices:

First, the OA discloses, defines, and governs the existence and implementation of the rights, interests, responsibilities, and obligations of those who have an economic, ownership, and/or functional stake in the LLC (Economic Provisions); and

Second, the OA discloses, defines, and governs the existence and implementation of the authority, discretion, and actualized-effect of the positions, capacities, and conduct of those who have an economic, ownership, and/or functional stake in the LLC (Control Provisions).

Specifically, the OA’s four categories of focus should be comprised of provisions that disclose, define, and govern the existence and implementation of:

One, the LLC’s formation and continuation as a business entity that complies with Colorado law;

Two, the capital contributions to the LLC;

Three, the LLC’s economic arrangement between the LLC’s members and the LLC’s distribution to those members of the LLC’s property (especially cash and cash equivalents); and

Four, the LLC’s members’ rights and obligations, especially with respect to following eight areas of consideration:

  1. Indemnification of members, managers, and agents;
  2. Management through either members or managers;
  3. Maintenance of LLC books and records;
  4. Transfer of the LLC’s equity interests;
  5. Termination and dissolution of the LLC;
  6. Interpretation, application, severability, and enforcement of the OA’s provisions;
  7. Integration into the OA of other understandings, acknowledgements, and agreements; and
  8. The effectiveness of different types of evidence (g., verbal, course of conduct, etc.) regarding the existence and implementation of the LLC, its business, and its documents.

Of practical importance are the OA’s original and basic provisions regarding the election to be treated as a partnership (for certain tax purposes); the engagement of an accounting approach (a cash basis or a GAAP-compliant accrual basis); and the determination of the type of tax year the LLC will follow (calendar vs. fiscal; if fiscal, the use of a weekly approach; if multiple member-calendaring exists, the application of IRS-imposed mandates). These mechanical provisions are important because, in certain instances, the LLC cannot later change its original approach.

Of critical importance are the OA’s specific provisions regarding the voluntary or involuntary termination of the rights and interests of those who have an ownership, economic, and/or functional stake in the LLC; along with the voluntary or involuntary dissolution and winding-down of the LLC’s existence and business. These provisions implicate financial, tax, and liability entitlements and obligations that exist even if an LLC is not actively engaged in business.

Does Colorado specifically require a written OA or a filed OA? The answers are, not necessarily, and, no, respectively. However, if the above-referenced reasons do not establish, from your personal perspective, sufficient reasons for reducing to writing and filing with Secretary of State an LLC’s OA, then consider the following four benefits to utilizing a written and filed OA:

One, a written and filed OA has proven instrumental to the acknowledgment – by the IRS, the courts, and attorneys representing third parties – that you are entitled to the personal liability protections afforded by the LLC structure (by demonstrating your personal diligence in, and respect for, the organizational existence and operational “best practices” of the LLC entity;

Two, a written and filed OA expressly communicates how the LLC will characterize and address sensitive factual scenarios, such as how profits will be distributed and how key business decisions will be contemplated and executed; and, perhaps most of all, how the LLC will respond to, and carry out, the addition or departure of its members;

Three, a written and filed OA can be vital in preventing various financial, administrative, and management misunderstandings, misinterpretations, and misapplications;

Four, a written and filed OA will allow for the establishment of the permitted-by-law guidelines, directives, procedure, and requirements that you personally determine are best for the structural existence, functional operation, and actual implementation of your business; as opposed to allowing the LLC to be governed, unnecessarily, by statutory “default” provisions that might be contrary to your intentions or which might be inconsistent with what you believe is optimal.

However, if you have reviewed and considered my prior articles, then you realize that you accomplish little-to-nothing by merely employing an OA that you do not understand; with which your actual practices do not comply; or as to which you have not participated, meaningfully, in its development and utilization – with personalized insight and input from professional advisors (e.g., attorneys, accountants, financial planners, etc.). If your business really matters, then the reality of your business needs to matter, including the agreement for its real operations.