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New Year, New Laws Affecting Limited Liability Companies

January 2, 2014, San Luis Obispo – Ringing in the New Year this January will bring significant changes in the way many limited liability companies (LLCs) in California are required to operate. On January 1, 2014, the California Revised Uniform Limited Liability Company Act (RULLCA) takes effect – bringing California’s LLC laws more in line with those of other states.

Chaptered into law in September 2012, the RULLCA is a revision of former laws governing LLCs, which clarifies and further defines rules on the formation and operation of LLCs. One of the major goals is to make it easier for multi-state businesses to operate in and/or outside of California.

While much of the RULLCA remains consistent with laws already in place, there are some major changes to consider. One of the most widely applicable is the new detail included in the procedure for any LLC member to withdraw or disassociate from the LLC and the consequences of that decision. It also alters which RULLCA sections can and cannot be overridden by an operating agreement.

Articles of organization and manager-managed and member-managed configurations continue to be in place for organizing management structures, but changes come into play with the governance of the fiduciary responsibilities of LLC members and managers. Although still subject to limitations, members and managers will now be relieved from liability for monetary damages as an outcome of a breach of duty. The extent that the operating agreement can define, alter or eliminate aspects of these kinds of duties is also further detailed; however, the existing law on the duty of care remains in place.  Other provisions that remain unchanged include those governing LLC dissolutions, definitions of the power of LLCs and the information rights of LLC members and LLC mergers and conversions.

Current LLCs are automatically brought under the requirements of the RULLCA, which means no new paperwork needs to be filed.

If you have questions about what these changes will mean for your business, please contact Ryan Andrews, an associate attorney at Carmel & Naccasha LLP, by calling (805) 546-8785.  Ryan works closely with businesses and business owners in the areas of contracts, corporate law, business planning & transactions, entity formations, and exit planning.

The information provided herein does not, and is not intended to, constitute legal advice; instead all information, content, and materials are for general informational purposes only.

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