Minnesota’s Revised Uniform Limited Liability Company Act (“new LLC Act”) act will take effect this Saturday, August 1, 2015. Any limited liability companies (LLCs) that are newly organized in Minnesota after that date will be subject to the new LLC Act under Chapter 322C of the Minnesota Statutes. Any LLCs that were formed prior to August 1, 2015 will be subject to the old MN LLC Act (under Chapter 322B of the Minnesota Statutes) until January 1, 2018, at the latest, when the new LLC Act will automatically govern those LLCs. However, any existing LLCs that were formed prior to August 1st can elect to be governed by the new LLC Act before the January 1, 2018 deadline. Here are a few key aspects of the new LLC Act:
By adopting this new LLC Act, MN LLC law now conforms to the laws of many other states. The new LLC Act allows for a bit more flexibility for the LLC to define the fiduciary duty under its operating agreement – such as the duty of care and duty of loyalty. The new LLC Act allows members to contract with one another more freely under the governing documents rather than having to have separate agreements for such terms.
An LLC’s bylaws and member control agreement will now be combined to create one agreement – the operating agreement. If there are any discrepancies between the LLC’s Articles of Organization and what is contained in the operating agreement, the terms of the operating agreement will govern as between the members of the LLC. While under the new LLC Act, the operating agreement can be an oral agreement, it is not advisable to do so and attorneys still strongly encourage having a written agreement. Also, the operating agreement can provide for the transfer of a member’s ownership interests in the LLC at his or her death.
Under the new LLC Act, the default rule for the governance of the LLC will be a member-managed LLC as opposed to the current Act, which provides for a board-of-governors managed LLC. Under a member-managed LLC under the new LLC Act, the voting rights are equal among its members, unless specified as otherwise in the operating agreement (this is different from the old LLC act in which voting rights were per capital contributions).
If you wish to form a new LLC or if you have any questions about how the new LLC Act affects your existing LLC, please contact an attorney for assistance.