Question: Marvie Kim Clarence and Goldie Tschetter purchased units in Huron
Marvie, Kim, Clarence, and Goldie Tschetter purchased units in Huron Kitchen LLC, a limited liability company, which would construct and own a Country Kitchen restaurant in South Dakota. As members of an LLC, they had management powers in proportion to their contributions of capital and could elect the managers of the LLC and set the managers' responsibilities. As LLC members, the Tschetters agreed to hire Country Hospitality Corporation to do much of the operation of the LLC. The LLC Operating Agreement required that the day-to-day decisions were made by two managers who were required to be members of the LLC, and selected by the other members. Members could authorize loans on behalf of the company by agreement. The members had the right to receive profits and distributions when warranted. The members could authorize incidental expenses within an aggregate of $12,500. The members were empowered to make any other routine actions incidental to the day-to-day activity of the LLC. The members were allowed to select officers for the LLC. Marvie, acting for all the Tschetters, exercised substantial control over the affairs of the LLC. Clarence and Goldie acquiesced in relying on Marvie and Kim for information and action. The minutes kept by the LLC showed that Tschetters were informed and active in the LCC. Unfortunately, the restaurant failed, and the Tschetters sued the person who sold them the interests in the LLC on the grounds that the LLC interests were securities, and therefore, the seller owed duties to them. Were the LLC interests securities?
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